Is Schwab Health Care Fund (SWHFX) A Strong Mutual Fund Pick Right Now?

Sector - Health fund seekers may want to consider taking a look at Schwab Health Care Fund SWHFX. SWHFX carries a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

Objective

Zacks categorizes SWHFX as Sector - Health, a segment packed with options. Sector - Health mutual funds offer investors a focus on the healthcare industry, one of the largest sectors in the American economy. These funds can include everything from pharmaceutical companies to medical device manufacturers and for-profit hospitals.

History of Fund/Manager

Schwab Funds is based in San Francisco, CA, and is the manager of SWHFX. Schwab Health Care Fund debuted in June of 2000. Since then, SWHFX has accumulated assets of about $839 million, according to the most recently available information. A team of investment professionals is the fund's current manager.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 16.06%, and is in the middle third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 6.95%, 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. Compared to the category average of 17.15%, the standard deviation of SWHFX over the past three years is 12.63%. The standard deviation of the fund over the past 5 years is 12% compared to the category average of 16.21%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

Investors cannot discount the risks to this segment though, as it is always important to remember the downside for any potential investment. In SWHFX's case, the fund lost 36.2% in the most recent bear market and underperformed its peer group by 3.35%. This makes the fund a possibly worse choice than its peers during a sliding market environment.

Investors should note that the fund has a 5-year beta of 0.97, so it is likely going to be as volatile as the market at large. Because alpha represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. With a positive alpha of 1.47, managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Holdings

Exploring the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is largely on equities that are traded in the United States.

As of the last filing date, the mutual fund has 97.91% of its assets in stocks, which have an average market capitalization of $118.18 billion. The fund has the heaviest exposure to the following market sectors:

1. Health
2. Industrial Cyclical

With turnover at about 42%, this fund makes more traders than comparable funds in a given year.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, SWHFX is a no load fund. It has an expense ratio of 0.80% compared to the category average of 1.34%. SWHFX is actually cheaper than its peers when you consider factors like cost.

While the minimum initial investment for the product is $100, investors should also note that there is no minimum for each subsequent investment.

Bottom Line

Overall, Schwab Health Care Fund SWHFX has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, Schwab Health Care Fund looks like a somewhat average choice for investors right now.

Want even more information about SWHFX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.