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5 Mutual Funds Basking in Optimism over Healthcare Bill

Senate Republicans recently introduced a draft Bill to replace Obamacare to remove the obstacles in the way of Medicaid expansion. This Bill adds to the positive sentiments over President Trump’s much-awaited pro-growth policies like tax reforms, which are expected to benefit biotech companies, which bode well for the healthcare sector. Also, recent reports suggested that Washington’s efforts to rein in drug prices would not be as harsh on biotech stocks as feared earlier.

Meanwhile, biotech companies are on the verge of a break out, cashing in on Trump’s tax plan spurring waves of buyouts. At the same time, innovation for the sector has reached exponential levels even as outrage over drug price ease out. This is why investing in mutual funds with significant exposure to the healthcare sector could be one of the most suitable investment options at present.

Key Highlights of the Senate Healthcare Bill

Per the Senate Bill, Medicaid expansion will continue under Obamacare for the next three years. However, states won’t receive open-ended funding; instead they will receive a fixed amount.The new bill also eliminated taxes imposed by Obamacare.

Further, the Bill seeks to remove some of the federally imposed barriers that states used to face while managing their Medicaid programs. Now, states can maintain not only the nominal healthcare coverage but to also access to care.

Biotech Companies Gain Momentum

Drug stocks skyrocketed recently as the Senate Bill has given boosted investor confidence in the ability of Republicans to achieve another major legislative reform. President Trump has promised to change the tax code, which in turn is expected to spur a series of buyouts in the innovation-starved biotech sector.

Moreover, Washington will find it hard to impose any stringent price controls with Tom Price as secretary of Health and Human Services since he has a history of rejecting such policies. This in turn has eased concerns over President Donald Trump’s warning on excessive drug pricing to the pharmaceutical industry.

Optimism over the Senate Healthcare Bill and recent gains in biotech stocks has given a boost to the healthcare sector, which has increased 16.2% so far this year. According to Morningstar, healthcare mutual funds have posted year-to-date and one-year returns of 20% and 22.4%, respectively.

Top 5 Healthcare Mutual Funds of 1H 2017

The aforementioned bullish factors call for investing in healthcare funds, even though the future is a little uncertain until the Healthcare Bill is passed in the Senate. Further, investors often rely on the healthcare sector to safeguard their investments. This is because demand for healthcare services does not vary much with market conditions and investments.

We have, thus, selected five strong performing healthcare mutual funds. These funds have given impressive returns in the year-to-date period. These funds boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), offer a minimum initial investment within $5,000 and carry a low expense ratio.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.

Fidelity Advisor Health Care Fund A FACDX seeks appreciation of capital. FACDX invests in securities issued by companies engaged in the design, production and sale of products or services used in the health care sector. The fund normally invests in both U.S. as well as non-U.S. companies.

The fund has YTD returns of 20.5% and an expense ratio of 1.04% compared with the category average of 1.36%. FACDX has a Zacks Mutual Fund Rank #2. 

Janus Global Life Sciences A JFNAX invests at least one-fourth — in securities of companies that portfolio managers believe have a life science orientation. JFNAX seeks capital appreciation for the long run.

The fund has YTD returns of 20.2% and an expense ratio of 1.04% compared with the category average of 1.36%. JFNAX has a Zacks Mutual Fund Rank #2. 

Franklin Biotechnology Discovery A FBDIX invests the lion’s share of its assets in securities of companies from the biotechnology domain. The fund may invest a maximum of one-fifth of its assets in equities as well as debt securities of U.S. and non-U.S. biotech companies. FBDIX is a non-diversified fund.

The fund has YTD returns of 15.3% and an expense ratio of 0.98% compared with the category average of 1.36%. FBDIX has a Zacks Mutual Fund Rank #1. 

Hartford Healthcare HLS Fund IA HIAHX invests the bulk of its assets in equity securities of companies engaged in the health care industry. These companies are located globally including the United States. HIAHX may invest in securities issued by companies of any market capitalization. The fund seeks appreciation of capital for the long run.

The fund has YTD returns of 22.3% and an expense ratio of 0.89% compared with the category average of 1.36%. HIAHX has a Zacks Mutual Fund Rank #1. 

Fidelity Select Biotechnology FBIOX invests the majority of its assets in common stocks of companies principally engaged in the research, development and distribution of various biotechnological products. This non-diversified fund seeks growth of capital for the long run. FBIOX invests in both U.S and non-U.S. biotech companies.

The fund has YTD returns of 25.3% and an expense ratio of 0.74% compared with the category average of 1.36%. FBIOX has a Zacks Mutual Fund Rank #2. 

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