Technology

Is Vanguard Health Care Admiral (VGHAX) a Strong Mutual Fund Pick Right Now?

Looking for a Sector - Health fund? You may want to consider Vanguard Health Care Admiral (VGHAX) as a possible option. VGHAX carries a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We note that VGHAX is a Sector - Health fund, and this area is also loaded with various options. Sector - Health mutual funds give investors an opportunity to focus on one of the largest sectors of the American economy, healthcare. Funds in this category can include everything from for-profit hospitals to pharmaceutical companies and medical device manufacturers.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VGHAX. Since Vanguard Health Care Admiral made its debut in November of 2001, VGHAX has garnered more than $35.17 billion in assets. Jean M. Hynes is the fund's current manager and has held that role since May of 2008.

Performance

Investors naturally seek funds with strong performance. This fund in particular has delivered a 5-year annualized total return of 6.76%, and is in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 6.68%, which places it in the top third during this time-frame.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Over the past three years, VGHAX's standard deviation comes in at 13.82%, compared to the category average of 13.38%. The standard deviation of the fund over the past 5 years is 13.56% compared to the category average of 13.71%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

One cannot ignore the volatility of this segment, however, as it is always important for investors to remember the downside to any potential investment. In VGHAX's case, the fund lost 31.76% in the most recent bear market and outperformed its peer group by 2%. This might suggest that the fund is a better choice than its peers during a bear market.

Nevertheless, with a 5-year beta of 0.86, the fund is likely to be less volatile than the market average. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. With a negative alpha of -1.56, managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, VGHAX is a no load fund. It has an expense ratio of 0.28% compared to the category average of 1.36%. So, VGHAX is actually cheaper than its peers from a cost perspective.

This fund requires a minimum initial investment of $50,000, and each subsequent investment should be at least $1.

Bottom Line

Overall, Vanguard Health Care Admiral ( VGHAX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Vanguard Health Care Admiral ( VGHAX ) looks like a somewhat average choice for investors right now.

For additional information on the Sector - Health area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into VGHAX too for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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