The biotechnology industry is in the limelight right now owing to the novel coronavirus. After all, as most biotechnology companies around the globe rush to formulate a vaccine in a bid to cure the fast-spreading, flu-like disease, mutual fund investors could find investing in this space beneficial in the long run.
In addition, the industry gained significantly last year from a series of mergers and acquisitions, initial public offerings, collaborative operations and new job additions. After all, the products and services offered by this industry are in demand round the year because of their nature, which make biotechnology a lucrative investment domain irrespective of how financial markets may perform.
Taking a look at how some major biotechnology exchange traded funds and indexes performed in 2019, one may note the impressive journey of the industry last year. Specifically, the SPDR S&P Biotech ETF (NYSE:XBI), iShares Nasdaq Biotechnology ETF (IBB), ProShares Ultra Nasdaq Biotechnology (BIB) and NASDAQ Biotechnology Index (NBI) rallied 30.5%, 23%, 41.8% and 22.9%, respectively.
This is why investing in mutual funds from the biotechnology industry is an ideal move right now. Let us compare two top-ranked funds from this space, each sporting a Zacks Mutual Fund Rank #1 (Strong Buy), and find out which is the best fund for investment purposes.
Fidelity Select Biotechnology Portfolio FBIOX fund invests the majority of its assets in the securities of companies that are mostly engaged in the research, development, manufacture and distribution of biotechnological products and services. The fund also invests in companies that gain considerably from scientific and technological advances in biotechnology. The non-diversified fund invests in U.S. and non-U.S. issuers alike.
This Sector-Health product has a history of positive total returns for over 10 years. Specifically, FBIOX has rallied 15.1% over a year. The fund’s returns are 11.7% of the 3-year and 3.8% of the 5-year period. To see how this fund performed compared to its category, and other #1 and #2 Ranked Mutual Funds, please click here.
The Fidelity Select Biotechnology Portfolio, as of the last filing, allocates its assets to Small Growth. Further, as of the last filing, AbbVie Inc (NYSE:ABBV), Vertex Pharmaceuticals Inc (NASDAQ:VRTX) and Biogen Inc (NASDAQ:BIIB) were the top holdings for FBIOX.
FBIOX was incepted on Dec 16, 1985. It carries an expense ratio of 0.72%. The fund has no minimal initial investment.
Franklin Biotechnology Discovery Fund Class A FBDIX aims for capital growth. The fund invests the majority of its assets in securities of biotechnology companies and discovery research firms. The non-diversified fund may also invest a smaller part of its assets in equity or debt securities of any type of issuer.
This Sector-Health product has a history of positive total returns for over 10 years. Specifically, FBDIX has rallied 12.8% over a year. The fund’s returns are 6.9% of the 3-year and 1.3% of the 5-year period. To see how this fund performed compared to its category, and other #1 and #2 Ranked Mutual Funds, please click here.
The Franklin Biotechnology Discovery Fund Class A, as of the last filing, allocates its assets to Small Growth. Further, as of the last filing, Vertex Pharmaceuticals Inc, Amgen Inc (NASDAQ:AMGN) and Gilead Sciences Inc (NASDAQ:GILD) were the top holdings for FBDIX.
FBDIX was incepted on Sep 15, 1997. It carries an expense ratio of 1.02%. The fund requires a minimal initial investment of $1000.
Conclusion
Taking a closer look at FBIOX and FBDIX, we find that the former proves to be a better choice. Although both funds sport a Zacks Mutual Rank #1, FBIOX provided investors with better returns over the one-, three- and five-year periods compared with FBDIX. FBIOX carries a lower expense ratio as well.
Although FBIOX has higher risk associated with it (three-year beta of 1.15 compared with FBDIX’s 1.11), it offers much higher returns to mutual fund investors.
Therefore, investors who like taking more risks for remarkable returns may opt for FBIOX. Although the current market conditions aren’t exactly encouraging, mutual funds are long-term investments and therefore, one would find these worthy investments.
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