Mutual Fund Spotlight: T. Rowe Price Health Sciences Fund [PRHSX]
By: Ted Black, CFP©
Summer 2022 (Vol. 40, No. 2)
In this issue, we’ll revisit the T. Rowe Price Health Sciences fund that was last reviewed back in late 2020. The thought here is that it may be time to put this fund on the radar as it has a very enviable long-term track record and strong demographic tailwinds, but like most stock based mutual funds, has struggled over the past 12 months or so.
The T. Rowe Price Health Sciences fund (PRHSX) is a no-load mutual fund that invests at least 80% of net assets in common stocks of companies engaged in the research, development, production, or distribution of products or services related to health care, medicine, or the life sciences. While the fund can invest in companies of any size, the majority of fund assets are expected to be invested in large and mid-capitalization companies.
For investors with a long-term outlook, the shift in the demographic makeup of our country may very well create some long-term investment opportunities. Within an industry such as Health Sciences that’s likely to have strong and durable demand, companies that can provide quality products and/or services at competitive prices and introduce technological breakthroughs have the opportunity to consistently grow their revenues and earnings, and subsequently see their share price appreciate.
This fund has north of $15.5 billion in assets under management and is managed by Ziad Bakri, CFA, M.D., with T. Rowe Price since 2011 and lead manager of this fund since April of 2016. As of July 31, 2022, the fund had approximately 82% of its assets in U.S. stocks, and about 9% in foreign stocks. Its largest holdings include leaders in their industry such as United Healthcare, AstraZeneca., Eli Lilly, and Pfizer. The minimum initial investment is $2,500 for non-retirement accounts and $1,000 for IRA accounts.
I want to quickly revisit the topic of asset allocation, which I’ve covered in this column in the past. The underlying theme of asset allocation is for an investor to establish a mix of Stocks, Bonds and Cash that offers a risk/reward profile suited to their individual circumstances. Since this fund concentrates all of investments in just one sector of the market, it may prove to be more volatile than the broader market. It’s important to keep this in mind when contemplating an investment in this or any “Sector” fund. With that said, we typically limit investments in sector funds to anywhere between 5% - 15% of one’s portfolio.
Performance annualized and updated through 07/31/2022:
1-Year: -11.83%; 3-Year: +12.57%; 5-Year: +12.03%.
The gross annual expense ratio is 0.75%.
If you’re interested in this fund, or would like a portfolio review to determine if this fund might be an appropriate addition to your portfolio, please call Ted Black, CFP© at 888-878-0001, extension 3.
Statistics and information provided by Morningstar and T. Rowe Price Investment Services, Inc. Please visit the T. Rowe Price website at www.troweprice.com for the most recent performance information. The principal value and investment return will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns shown, unless otherwise indicated, are total returns, including any capital gains or losses and all dividend and capital gains distributions. The performance data quoted represents past performance and in no way guarantees future results. Mutual funds are not FDIC insured.
Mutual funds are sold by prospectus. An investor should consider the investment objectives, risks, charges and expenses of the investment company carefully before investing. The prospectus contains this and other information about the investment company. Please contact our office at 888-878-0001 to obtain a prospectus. Please read the prospectus carefully before you invest or send money.
Advisory services offered through Royal Palm Investment Advisors, Inc., a Registered Investment Advisor.