The Vanguard Health Care Fund (Trades, Portfolio) (VGHCX, Financial)’s selection of stocks from a variety of areas within the foreign and domestic health care sector has resulted in a fantastic performance record.
The fund achieved a one-year return of 12.04% for the period ended Sept. 30, a three-year return of 24%, a five-year return of 20.6%, a 10-year return of 11.8%, and a return since inception in May 1984 of 17.1%, on average annually. It also beat its benchmark index, the Spliced Health Care Index, for each period, including since the fund’s inception, with an average annual return of 11.3%.
Vanguard describes the fund as a “5” on its risk-return scale – its highest level of aggressiveness. Its higher rate of geographic diversity (19.5% in foreign holdings compared to zero for the MSCI ACWI Health Care Fund), and lower turnover distinguish it from other health care funds. As of Nov 30, the fund contained 82 positions with a median market cap of $43.8 billion and P/E ratio of 35.8x, higher than the MSCI ACWI Health Care Fund’s P/E ratio of 23.8x.
As of Sept. 30, these were the fund’s top health care picks: Bristol-Myers Squibb Company (BMY, Financial), Allergan PLC (AGN, Financial), UnitedHealth Group Inc. (UNH, Financial), Merck & Co. Inc. (MRK, Financial) and Eli Lilly and Co. (LLY, Financial).
Bristol-Myers Squibb Company (BMY, Financial)
Vanguard Health Care Fund (Trades, Portfolio) held 45,346,149 million shares of Bristol-Myers Squibb Company, a 5.79% portfolio weight. It began buying the stock before the first quarter of 2011 and held 2.7% of its outstanding shares.
Bristol-Myers Squibb Co. is a Delaware corporation and was incorporated in August 1933 under the name Bristol-Myers Company. Bristol-Myers Squibb Co. has a market cap of $115.06 billion; its shares were traded at around $68.97 with a P/E ratio of 65.16 and P/S ratio of 6.99. The dividend yield of Bristol-Myers Squibb Co. stocks is 2.13%.
Vanguard Health Care Fund (Trades, Portfolio) held 9,190,927 shares of Allergan PLC, a 5.39% portfolio weight and 2.3% of its outstanding shares. It started the position in fourth quarter 2012.
Allergan PLC, formerly known as Actavis PLC, was incorporated in Ireland on May 16, 2013. Allergan PLC has a market cap of $122.66 billion; its shares were traded at around $311.23 with a P/E ratio of 39.50 and P/S ratio of 5.32. The dividend yield of Allergan PLC stocks is 0.09%. Allergan PLC had an annual average earnings growth of 3.8% over the past five years.
UnitedHealth Group Inc. (UNH, Financial)
Vanguard Health Care Fund (Trades, Portfolio) held 21,467,000 shares of UnitedHealth Group Inc., a 5.37% portfolio weight and 2.25% of its shares outstanding. It started the position in the first quarter of 2010.
UnitedHealth Group Inc. was incorporated in Minnesota in January 1977. UnitedHealth Group Inc. has a market cap of $112.79 billion; its shares were traded at around $118.34 with a P/E ratio of 18.81 and P/S ratio of 0.78. The dividend yield of Unitedhealth Group Inc. stocks is 1.58%. UnitedHealth Group Inc. had an annual average earnings growth of 12.6% over the past 10 years. GuruFocus rated UnitedHealth Group Inc. the business predictability rank of 4.5-star.
Merck & Co. Inc. (MRK, Financial)
Vanguard Health Care Fund (Trades, Portfolio) held 49,743,388 shares of Merck & Co., a 5.3% portfolio weight and 1.78% of shares outstanding. It started the position before the first quarter of 2010.
Merck & Co. Inc. was incorporated in New Jersey in 1970. Merck & Co. Inc. has a market cap of $147.64 billion; its shares were traded at around $52.85 with a P/E ratio of 14.13 and P/S ratio of 3.81. The dividend yield of Merck & Co. Inc. stocks is 3.42%. Merck & Co. Inc. had an annual average earnings growth of 5.40% over the past 10 years. GuruFocus rated Merck & Co Inc the business predictability rank of 2.5-star.
Eli Lilly and Co. (LLY, Financial)
Vanguard Health Care Fund (Trades, Portfolio) held 23,854,960 shares of Eli Lilly and Co., a 4.3% portfolio weight and 2.2% of shares outstanding. It started the position prior to third quarter 2010.
Eli Lilly and Co. was incorporated in Indiana in 1901. Eli Lilly And Co. has a market cap of $95.13 billion; its shares were traded at around $85.85 with a P/E ratio of 38.85 and P/S ratio of 4.66. The dividend yield of Eli Lilly and Co. stocks is 2.34%. Eli Lilly and Co. had an annual average earnings growth of 10.80% over the past 10 years.
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