The top five holdings of this mutual fund are: UnitedHealth Group Inc (UNH, 5.85% of assets), Pfizer Inc (PFE, 5.52%), AstraZeneca PLC (AZN.L, 5.36%), Bristol-Myers Squibb Company (BMY, 4.23%), and Novartis AG (NOVN, 3.57%).
Vanguard Health Care Fund Investor Shares (VGHCX)
From Moneyletter
The objective of the Vanguard Health Care Fund is to provide long-term capital appreciation. This task falls upon Wellington Management Company, who is the subadvisor on the fund. Wellington is a globally integrated firm serving clients around the world. As of this writing, the company manages over $1 trillion for 2,300-plus clients.
For this fund, Wellington looks to invest in those innovative firms with differentiated products or services. Valuation also plays a role in stock selection as they search for attractive valuations relative to that company’s growth prospects. It is this stock selection that drives the industry exposures or weights. In other words, the fund takes a bottom-up approach.
Not only is this fund diversified by industries, it is also geographically diversified. This global fund will typically be invested 20-30% in foreign stocks, but per its prospectus it can go as high as 50%.
Let’s dig a little deeper and see what this portfolio looks like once the analysis and stock selection has occurred, starting first with industry weights. As of 11/30/20, the portfolio had roughly 40% invested in pharmaceuticals, 18.5% in biotech, and close to 17% in health care equipment to round out the top three industries. Relative to the benchmark (MSCI All Country World Index Health Care) pharmaceuticals and biotech are over-weights, with health care equipment an underweight. It’s no surprise that pharmaceutical companies are heavily factored into the top names. VGHCX will hold roughly 90-100 names.
Of course, past performance does not guarantee future returns. But what is known is that we are in the midst of a scientific and technological advancement in the health care sector, and it is affecting many of the industries listed above. Need proof? Just look at the COVID-19 vaccine. Look at how it was developed and how, in many ways, the future of vaccine development is here—today. This is just one of the many reasons that many are excited about investing in health care.
Brian W. Kelly, Moneyletter, moneyletter.com, 800-890-9670, January 2021