Hi folks,
I'm looking to add a healthcare fund/etf to my solo 401k. Having a hard time picking between T Rowe Price Health Sciences (PRHSX), Fidelity Select Health Care (FSPHX), Vanguard Health Care (VGHCX) and Vanguard Health Care ETF (VHT). It's more-or-less a coin flip, though, I'm leaning slightly toward PRHSX for no reason, other than I've done well with the other TRP funds I own, though the recent manager change is a bit of a caution note. I'd appreciate any thoughts, insight, or input that might help break the tie.
Thanks.
Comments
Regards,
Ted
P.S. The new manager is doing just fine !
Article On New Fund Manager: http://www.baltimoresun.com/business/money/bs-bz-taymour-20130503,0,913147,print.story
I think any of those are fine funds, the one I have is closed to new investors, PHSZX, and for biotech, I have Fidelity's Biotech Fund. One thing I added however, since many of the health sciences or health care funds have a cross section of pharma, biotech, devices, equipment, etc is an ETF which is more a pure play large on large pharma, PJP. It had less downside in 2008 than the health care funds, and has an acceptable standard deviation compared to the others. and provides a very nice return
Here is the profile from M*
http://etfs.morningstar.com/quote?t=PJP®ion=USA&culture=en-US
Faced with a similar decision a year ago, I did 50/50 on FSPHX and VGHCX (the dividends being a factor in the decision to pick these 2 over PRHSX).
If you insist on one, I will lean towards FSPHX: it has the lowest asset base, expense is about the same as PRHSX (0.78 vs 0.79); both PRHSX and FSPHX have higher returns than VGHSX with the lower expense of 0.35.
Have fun and let us know your final decision.
Unlike you (and many others, apparently), I'm not high on pharma. It seems like the big companies have been buying smaller ones for years to keep up their cash flows as they lose patent rights on their blockbuster drugs. Maybe they have more in their pipelines, but it's a big risk, especially for big companies for which a small hit has little impact.
Even though it's not open, I took a quick look at your PHSZX. Lots of pharmaceuticals in the top holdings, so I'm not sure you really need to supplement it, but as I said, reasonable people can differ. Nice mix, though, with all the subsectors you mentioned, and also managed care/insurance providers (which IMHO should do moderately well despite the 20% cap on internal expenses, due to increased volume).
I suspect pharma is less volatile in part simply because the size of the companies are larger than, say, biotech. Of course, one could have made the same argument in favor of holding banks in 2008, so take that thought for what it is worth.
Regards,
Ted
http://www.marketwatch.com/tools/mutual-fund/compare?Tickers=FSPHX+VGHCX+PRHSX&Compare=Returns
I was a bit confused by your response that PHSZX had lots of pharma in the top holdings. Only one of their top ten is actually a large pharma, 7 are biotechs, one insurance and one service co. True, when you look at the top ten, the names do say Biomarin Pharmaceuticals, Vertex Pharmaceuticals, etc but just because they say pharma in their name does not mean they are large pharma
I truly enjoy your participation on MFO and read your posts quite often, (most of them almost all the way through
Ted: You got me there; but in any given year, I will gladly take the returns of any of the 3 funds: PRHSX, FSPHX, VGHCX. They are all good - like I wrote, I had my eyes on those juicy dividends, but I am sure the returns in marketwatch includes re-invested dividends. Yes, PRHSX is also a worthy choice.
Regards,
Ted
Thanks for the correction on the holdings. Just goes to show that one should take more than a cursory look before sticking one's foot in one's mouth.
Thanks also for letting me know that I don't always make such blunders - sometimes I say something useful.
I vascillated back and forth on whether I should post the correction, its a mistake easily made. I often have that same foot in mouth disease
Frankly, it was a sector fund and I wanted out. So I'm kidding. I will not be buying it back again.
Here's another way to look at it. If you take a 50/50 mix of these two funds, then all of the top ten holdings in the combined portfolio come from both of the funds. Further, these are not small positions in either fund. (18 out of the top 25 positions come from both funds, if one drills down further.)
As you noted, on average a company in PRHSX represents about 0.54% of the portfolio (1/185), and about 1% of FSPHX. All ten of the largest holdings in the combined portfolio are above average size holdings in both funds. In PRHSX, all but one of the companies represents at least 1.12% of the portfolio (i.e. is at least double the average size holding). In FSPHX, all but one of the companies represents at least 2.08% of the portfolio (again, is at least double the average size holding).
The top ten holdings, with their heavy overlap, represent 31.86%, or about 1/3, of the combined portfolio. The Fidelity fund is extremely top heavy, with 42% in its top ten holdings. Of those, seven (representing 32% of the Fidelity fund) overlap with the TRP fund. Likewise, seven of the TRP fund's top ten holdings overlap with the Fidelity fund.
So while the two funds have many holdings that don't overlap, even some of their top ten stocks, at their core these funds have a lot in common by dollars invested.