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3 Healthcare Mutual Funds to Grab on the Sector's 2024 Revival
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The healthcare sector roughly accounts for an eighth share of the S&P 500 but lagged last year, with investors flocking to mega-cap tech and growth stocks based on the artificial intelligence (AI) boom. While a late-year rally in 2023 saw the sector staging a recovery, it did not stop healthcare from becoming one of the S&P 500’s worst-performing sectors in 2023, rising just 0.3% compared with the benchmark index’s 24% jump.
However, the segment has undergone massive technological upheavals that should should have a long-standing impact. Growth in key areas like telehealth, surgery, data analytics and biotechnology have aided in a big way. Also, health spending in the United States has been forecast to grow at an average annual rate of 5.4% for 2019-2028 and should reach $6.2 trillion by 2028. While the industry faces labor shortages and recessionary pressures in the post-pandemic world marked by a European war, it is currently pitted to grow at a higher rate than the overall economy.
Globally, approximately $8.3 trillion is being spent on healthcare, with almost half of that, roughly $3.8 trillion, coming from the United States. Considering the fact that the healthcare sector is growing faster than the overall world economy, these figures are expected to rise substantially by the turn of the decade.
An aging population dominated by Gen X and baby boomers and epidemics like obesity and diabetes have also helped the sector grow. Moreover, these stocks are considered defensive, meaning they tend to remain stable regardless of the prevalent market conditions. Regular demand for healthcare services is not dependent on the peaks and troughs of a market that has risen and fallen over the past two years over the Fed’s monetary policy.
The healthcare sector is poised for significant long-term changes, including the integration of AI in medical research. The sector also seems lucrative for investors looking for a steady cash flow because pharmaceutical companies are known to offer regular dividends. Healthcare has also seen growth in the ETF market in 2024. The S&P 500 Select Sector SPDR for Healthcare (XLV) grew 13.4% over the last 12 months.It may be off its pandemic-period peak but will remain resilient and grow in the coming years.
Hence, astute investors should bet on healthcare mutual funds at present. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Our Picks
We have thus selected three such healthcare mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy), 2 (Buy), have positive three-year and five-year annualized returns, minimum initial investments within $5000, and carry a low expense ratio.
Janus Henderson Global Life Sciences (JNGLX - Free Report) primarily invests in equity securities issued by companies engaged in life sciences orientation.
Andrew Acker has been the lead manager of JNGLXsince April 2007. The fund has 7.1% of its portfolio invested in Eli Lilly, 5.8% in UnitedHealth Group and 5.2% in Novo Nordisk.
JNGLX’s 3-year and 5-year annualized returns are 7.4% and 14%, respectively. Its net expense ratio is 0.80%. JNGLX has a Zacks Mutual Fund Rank #1. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Putnam Global Health Care (PHSTX - Free Report) primarily invests in common stocks of both large and mid-cap companies from the healthcare sector that the fund’s advisors believe have great investment potential.
Michael Maguire has been the lead manager of PHSTX since November 2016. The fund has 8.4% of its portfolio invested in UnitedHealth Group, 8.2% in Eli Lilly and 6.8% in AbbVie.
PHSTX’s 3-year and 5-year annualized returns are 8.9% and 15%, respectively. Its net expense ratio is 0.53%. PHSTX has a Zacks Mutual Fund Rank #2.
Fidelity Select Pharmaceuticals Portfolio (FPHAX - Free Report) primarily invests in stocks of companies principally engaged in the research, development, manufacture, sale, or distribution of pharmaceuticals and drugs of all types. FPHAX advisors use fundamental analysis of factors like each issuer's financial condition and industry position, as well as market and economic conditions, to arrive at their investment decision.
Karim Suwwan de Felipe has been the lead manager of FPHAX since June 2017. The fund has 23.8% of its portfolio invested in Eli Lilly, 14.7% in Novo Nordisk and 9% in AstraZeneca.
FPHAX’s 3-year and 5-year annualized returns are 13.6% and 16.8%, respectively. Its net expense ratio is 0.74%. FPHAX has a Zacks Mutual Fund Rank #1.
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3 Healthcare Mutual Funds to Grab on the Sector's 2024 Revival
The healthcare sector roughly accounts for an eighth share of the S&P 500 but lagged last year, with investors flocking to mega-cap tech and growth stocks based on the artificial intelligence (AI) boom. While a late-year rally in 2023 saw the sector staging a recovery, it did not stop healthcare from becoming one of the S&P 500’s worst-performing sectors in 2023, rising just 0.3% compared with the benchmark index’s 24% jump.
However, the segment has undergone massive technological upheavals that should should have a long-standing impact. Growth in key areas like telehealth, surgery, data analytics and biotechnology have aided in a big way. Also, health spending in the United States has been forecast to grow at an average annual rate of 5.4% for 2019-2028 and should reach $6.2 trillion by 2028. While the industry faces labor shortages and recessionary pressures in the post-pandemic world marked by a European war, it is currently pitted to grow at a higher rate than the overall economy.
Globally, approximately $8.3 trillion is being spent on healthcare, with almost half of that, roughly $3.8 trillion, coming from the United States. Considering the fact that the healthcare sector is growing faster than the overall world economy, these figures are expected to rise substantially by the turn of the decade.
An aging population dominated by Gen X and baby boomers and epidemics like obesity and diabetes have also helped the sector grow. Moreover, these stocks are considered defensive, meaning they tend to remain stable regardless of the prevalent market conditions. Regular demand for healthcare services is not dependent on the peaks and troughs of a market that has risen and fallen over the past two years over the Fed’s monetary policy.
The healthcare sector is poised for significant long-term changes, including the integration of AI in medical research. The sector also seems lucrative for investors looking for a steady cash flow because pharmaceutical companies are known to offer regular dividends. Healthcare has also seen growth in the ETF market in 2024. The S&P 500 Select Sector SPDR for Healthcare (XLV) grew 13.4% over the last 12 months.It may be off its pandemic-period peak but will remain resilient and grow in the coming years.
Hence, astute investors should bet on healthcare mutual funds at present. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Our Picks
We have thus selected three such healthcare mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy), 2 (Buy), have positive three-year and five-year annualized returns, minimum initial investments within $5000, and carry a low expense ratio.
Janus Henderson Global Life Sciences (JNGLX - Free Report) primarily invests in equity securities issued by companies engaged in life sciences orientation.
Andrew Acker has been the lead manager of JNGLXsince April 2007. The fund has 7.1% of its portfolio invested in Eli Lilly, 5.8% in UnitedHealth Group and 5.2% in Novo Nordisk.
JNGLX’s 3-year and 5-year annualized returns are 7.4% and 14%, respectively. Its net expense ratio is 0.80%. JNGLX has a Zacks Mutual Fund Rank #1. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Putnam Global Health Care (PHSTX - Free Report) primarily invests in common stocks of both large and mid-cap companies from the healthcare sector that the fund’s advisors believe have great investment potential.
Michael Maguire has been the lead manager of PHSTX since November 2016. The fund has 8.4% of its portfolio invested in UnitedHealth Group, 8.2% in Eli Lilly and 6.8% in AbbVie.
PHSTX’s 3-year and 5-year annualized returns are 8.9% and 15%, respectively. Its net expense ratio is 0.53%. PHSTX has a Zacks Mutual Fund Rank #2.
Fidelity Select Pharmaceuticals Portfolio (FPHAX - Free Report) primarily invests in stocks of companies principally engaged in the research, development, manufacture, sale, or distribution of pharmaceuticals and drugs of all types. FPHAX advisors use fundamental analysis of factors like each issuer's financial condition and industry position, as well as market and economic conditions, to arrive at their investment decision.
Karim Suwwan de Felipe has been the lead manager of FPHAX since June 2017. The fund has 23.8% of its portfolio invested in Eli Lilly, 14.7% in Novo Nordisk and 9% in AstraZeneca.
FPHAX’s 3-year and 5-year annualized returns are 13.6% and 16.8%, respectively. Its net expense ratio is 0.74%. FPHAX has a Zacks Mutual Fund Rank #1.
Want key mutual fund info delivered straight to your inbox?
Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>