Healthcare: A Fidelity Trio

09/12/2014 8:00 am EST

Focus: FUNDS

Jim Lowell

Partner & Chief Investment Officer, Adviser Investments

In a review of 2014’s Top 10 Select Funds from Fidelity, fund expert Jim Lowell, editor of Fidelity Investor, reiterates his buy ratings on a trio of healthcare-related funds.

Health Care (FSPHX)

Buy. Buy. Buy. Longstanding members probably think I’m spellbound by this sector. But my longstanding recommendation for a sizable overweight in this sector and this fund hasn’t been unthinking or unchallenged.

Heading into this year, after a multi-year bull market run for healthcare stocks in particular, I recommended trimming our stake some...reducing the possible risk of those who had become overexposed to the sector selling en masse and keeping our above-market weighting in fighting shape to be able to rebuild based on the merits of the current fundamentals and future trends.

Manager Eddie Yoon often takes time out of his schedule to speak with us about this fund and the sector’s pitfalls and potentials.

He remains focused on a diversified prescription for companies in the healthcare industry: Pharmaceuticals, diagnostic, administration, hospital supply, medical technology, and biotech companies.

This sector fund began trading July 1981 and has a market value of $6.5 billion. If you had invested $10,000 in the fund on the day of its inception through the end of last month, you would have $1,565,453.

A healthy sum, to say the least. You know my view: less invasive treatments for growing aging populations and emerging global consumers makes healthcare a no brainer; those who don’t get it, might be candidates for brain surgery.

Foreign investments make up 27.1% of the holdings. The top holdings include Actavis, Agilent Technologies, and Teva Pharmaceutical.

Medical Delivery (FSHCX)

Manager Steven Bullock invests in companies involved in the delivery of healthcare services, such as hospital management, nursing homes, and health maintenance organizations.

These companies took it on the chin thanks to political (not fundamental) assumptions about how Obamacare would ravage their top lines. Good companies here do what good companies in other sectors do: adapt and evolve to their changing environment.

The fund began trading June 1986 and has a market value of $685 million. Foreign investments make up 4.5% of the holdings. The top holdings include UnitedHealth Group, Express Scripts, and Air Methods.

Pharmaceuticals (FPHAX)

Big. Liquid. Dividend Paying. Global. Necessary. Proven. R&D opportunities. Lower risk. What’s not to like?

Manager Asher Anolic invests in companies involved with the research, development, manufacture, sale, or distribution of pharmaceuticals and drugs. It began trading July 2001 and has a market value of $1.5 billion.

The top five country representations are the US (50.8%), UK (12%), Ireland (11.8%), Switzerland (8.8%), and France (4.1%). The top holdings include AbbVie, AstraZeneca, and Valeant Pharmaceuticals.

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