Is T. Rowe Price Health Sciences (PRHSX) a Strong Mutual Fund Pick Right Now?

If investors are looking at the Sector - Health fund category, T. Rowe Price Health Sciences (PRHSX) could be a potential option. PRHSX bears a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

We note that PRHSX is a Sector - Health fund, and this area is also loaded with various options. Sector - Health mutual funds give investors an opportunity to focus on one of the largest sectors of the American economy, healthcare. Funds in this category can include everything from for-profit hospitals to pharmaceutical companies and medical device manufacturers.

History of Fund/Manager

T. Rowe Price is based in Baltimore, MD, and is the manager of PRHSX. T. Rowe Price Health Sciences debuted in December of 1995. Since then, PRHSX has accumulated assets of about $6.85 billion, according to the most recently available information. The fund is currently managed by Ziad Bakri who has been in charge of the fund since April of 2016.

Performance

Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 3.77%, and it sits in the bottom third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 9.45%, which places it in the middle third during this time-frame.

It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.

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. The standard deviation of PRHSX over the past three years is 15.3% compared to the category average of 13.64%. Over the past 5 years, the standard deviation of the fund is 15.82% compared to the category average of 14.83%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. PRHSX has a 5-year beta of 0.65, which means it is likely to be less volatile than the market average. 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 negative alpha of -5.46, managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

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, PRHSX is a no load fund. It has an expense ratio of 0.83% compared to the category average of 1.01%. Looking at the fund from a cost perspective, PRHSX is actually cheaper than its peers.

While the minimum initial investment for the product is $2,500, investors should also note that each subsequent investment needs to be at least $100.

Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.

Bottom Line

Overall, even with its comparatively weak performance, average downside risk, and lower fees, T. Rowe Price Health Sciences ( PRHSX ) has a high Zacks Mutual Fund rank, and therefore looks a great potential choice for investors right now.

Your research on the Sector - Health segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.

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This article originally published on Zacks Investment Research (zacks.com).

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