Although Vanguard has developed a reputation for its index funds, it actually has almost ⅓ of its assets under management for active funds with stock pickers. What has caught my attention recently is that the Vanguard Health Care Fund (VGHCX) has recently fallen in price. Back in December, Vanguard Health Care traded at $232 per share and has since come down in price to $190 per share as of Friday’s closing at $190.
I pay attention price declines in the valuation of health care stocks because of Dr. Jeremy Siegel’s research documenting 13% annual returns for healthcare investors between 1956 and 2003, second only to the tobacco sector of that time frame. The profit margins in the sector are enormous, and the only recurring risk for investors is what I call the “Pfizer” effect–the rebasing of earnings that occurs when cash cows like Lipitor lose patent exclusivity and profits fall … Read the rest of this article!