Top Performing Healthcare/Biotech Funds For Q1 2015

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Includes: AHSAX, ETAHX, FACDX, FBDIX, FBTAX, FPHAX, FSMEX, HHCAX, JFNAX, PRHSX, RAGHX, RYBOX, RYHEX, TMSFX, VCHSX
by: Zacks Funds

For Q1 2015, Healthcare mutual funds continued the momentum they experienced in 2014. Healthcare funds soared over 30% to emerge as the best gainers among the sector equity funds in 2014. Mergers and acquisitions (M&As) and licensing agreements dominated in 2014, and the trend has been repeated in first-quarter 2015 as well. Though new rules by the Treasury Department muted the tax inversion deals, it has not deterred the M&A activities.

So far, biotech companies with new therapies or interesting pipeline candidates have been attracting a lot of attention. The M&A frenzy shows no signs of slowing down, and bellwethers are actively busy in licensing activity to bolster their beleaguered pipelines. Thus, the sector promises to be profitable going forward, just as it has been last year.

Sector Performance

Looking at the broader markets, markets had a choppy first-quarter 2015. The Dow snapped a three-quarter winning streak. However, the S&P 500 gained 0.4% and extended its quarterly winning streak to nine quarters. The NASDAQ advanced 3.5%, also extending its winning streak to nine quarters, its longest stretch of quarterly gains ever.

Nonetheless, gains in the biotech sector have been far greater. The NASDAQ Biotechnology Index jumped 13.2% in the first quarter. As of Apr 15, it boasts year-to-date gains of 18.7%. The Health Care Select Sector SPDR ETF (NYSEARCA:XLV) notched up gains of 6% in Q1, and as of Apr 15, it is the top gainer among the S&P industry groups with gains of 8.2%.

Looking at the mutual funds, the healthcare mutual funds were once again the best gainers among the sector equity funds. Its robust 10.7% return in Q1 was far above the second-placed Real Estate sector's return of about 4.4%.

Sector Equity Funds

Return (in %)

Q1'15

1 Year

Health

10.71

32.38

Real Estate

4.37

22.52

Global Real Estate

4.06

12.87

Consumer Cyclical

3.88

13.01

Technology

2.99

13.1

Consumer Defensive

2.55

12.5

Communications

2.11

4

Industrials

1.77

8.06

Financial

0.15

3.39

Energy Limited Partnership

-1.29

2.68

Equity Energy

-1.35

-19.95

Natural Resources

-1.35

-15.63

Utilities

-2.26

7.08

Equity Precious Metals

-3.88

-22.91

Source: Morningstar

M&A Activities, Q1 Earnings Season

M&As continued to be a key event for the pharma and biotech sector. AbbVie's (NYSE:ABBV) $21 billion acquisition agreement with Pharmacyclics (NASDAQ:PCYC) was among the biggest deals. Separately, Actavis (NASDAQ:ACT)-Allergan (NYSE:AGN), Shire (NASDAQ:SHPG)-NPS Pharmaceuticals (NASDAQ:NPSP), Endo (NASDAQ:ENDP)-Auxilium (NASDAQ:AUXL), and Pfizer (NYSE:PFE)-Hospira (NYSE:HSP) deals have been in the news.

The first-quarter earnings season was off to a soft start. However, as of Apr 15 morning, 1.9% companies from the medical sector reported 100% beat ratio. While the Q1 total earnings projected to be down 2.9% year over year on a 5.1% drop in revenues, the Medical sector boasted Q1 earnings estimates of a 10.6% y/y surge on an estimated 9.1% sales growth.

Top 15 Biotech Mutual Funds in Q1

Below we present the top 15 Healthcare funds with best returns of Q1 2015:

Fund Name

3 Month Total Return

3 Mo % Rank vs. Obj

% Yield

Average EPS Growth

Expense Ratio

Beta vs. S&P 500

Load

Turner Medical Science Lng/Srt Inv (MUTF:TMSFX)

24.76

1

0

0

2.18

0.4

N

Fidelity Adv Biotechnology A (MUTF:FBTAX)

14.66

4

0

15.5

1.08

1.18

Y

Franklin Biotechnology Discovery A (MUTF:FBDIX)

14.4

7

0

15.5

1.08

1.03

Y

T. Rowe Price Health Sciences (MUTF:PRHSX)

14

10

0

13.1

0.77

0.91

N

VALIC Co I Health Sciences Fund (MUTF:VCHSX)

14

9

0

12.67

1.11

0.92

N

Rydex Biotechnology A (MUTF:RYBOX)

13.85

12

0

16.06

1.61

1.13

Y

Janus Global Life Sciences A (MUTF:JFNAX)

13.15

19

0

12.65

1.03

0.78

Y

AllianzGI Health Sciences Fund A (MUTF:RAGHX)

12.03

25

0

13.54

1.46

0.65

Y

Eventide Healthcare & Life Sciences A (MUTF:ETAHX)

11.84

27

0

32.67

1.66

-

Y

Fidelity Adv Health Care A (MUTF:FACDX)

11.75

31

0

10.18

1.07

0.94

Y

Alger Health Sciences Fund A (MUTF:AHSAX)

11.31

36

0.5

11.87

1.31

0.78

Y

Fidelity Select Medcl Equip & Sys (MUTF:FSMEX)

10.76

38

0.09

13.12

0.78

1.05

N

Fidelity Select Pharmaceuticals (MUTF:FPHAX)

10.71

39

0.65

11.29

0.8

0.7

N

Rydex Health Care A (MUTF:RYHEX)

10.34

43

0

13.63

1.62

0.89

Y

Highland Lg/Sh Healthcare A (MUTF:HHCAX)

10.34

43

0

15.23

1.7

0.28

Y

Note: The list excludes the same funds with different classes, and institutional funds have been excluded. Funds having minimum initial investment above $5,000 have been excluded. 3-M % Rank vs. Objective* equals the percentage the fund falls among its peers. Here, 1 being the best and 99 being the worst.

Fidelity funds seem to be dominating this space. Four Fidelity funds managed to be among the top healthcare funds gainers.

T. Rowe Price Health Sciences Fund and Janus Global Life Sciences Fund A carry the Zacks Mutual Fund Rank #1 (Strong Buy). T. Rowe Price Health Sciences is also featured among the top 10 gainers for the last 5 years' return while markets entered into the 6th year of its bull run. (Read: Bull Market Turns 6: Top Mutual Fund Gainers).

Separately, Franklin Biotechnology Discovery Fund A, VALIC Company I Health Sciences Fund, Fidelity Advisor Health Care Fund A and Fidelity Select Medical Equipment and Systems Portfolio carry a Zacks Mutual Fund Rank #2 (Buy).

However, the second-highest gainer Fidelity Advisor Biotechnology Fund A has recently bagged the Lipper award in the Health/Biotechnology Funds categories over the 3-year period. However, it carries a Zacks Mutual Fund Rank #5 (Strong Sell). Eventide Healthcare & Life Sciences Fund A, Fidelity Select Pharmaceuticals and Rydex Health Care Fund A carry a Zacks Mutual Fund Rank #4 (Sell).

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