5 Best-Performing Biotech Mutual Funds of 2019

Zacks Equity Research

Updated Wed, Jan 22, 2020, 4:52 AM

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The biotechnology industry witnessed remarkable growth last year, owing to a series of mergers and acquisitions, initial public offerings, collaborative operations and new job additions in the space that boosted it throughout 2019. What’s more, the products and services offered by the industry are always in demand because of their nature, which makes biotech a lucrative investment space irrespective of market conditions.

Biotech Indexes Fare Well in 2019

The industry made headlines since the beginning of 2019, thanks to numerous mergers and acquisitions, and initial public offerings that kept the space in investors’ focus. Bristol-Myers Squibb’s acquisition of Celgene Corporation and Eli Lilly and Company’s acquisition of Loxo Oncology were some of the major deals that took place last year.

Second, the number of initial public offerings was also considerable. Biotech IPOs have been increasing steadily over the past few years. This is because biotech companies require significant financing, particularly as they advance their research. By going public, a significant portion of this much-required financing is taken care of. This also makes these biotech firms more visible for collaborations and acquisitions.

Strategic collaborations also surfaced as major game changers for the industry. Amgen’s collaboration with BeiGene and Biogen’s partnership with C4 Therapeutics were some crucial alliances last year.

Owing to these factors, major biotech ETFs and indexes performed impressively in 2019. Specifically, the SPDR S&P Biotech ETF (XBI), iShares Nasdaq Biotechnology ETF (IBB), ProShares Ultra Nasdaq Biotechnology (BIB) and NASDAQ Biotechnology Index (NBI) gained 30.5%, 23%, 41.8% and 22.9%, respectively.

5 Top Biotech Mutual Funds

We have, therefore, selected five biotech mutual funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). In addition, the minimum initial investment for these funds is within $5,000.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund.

The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Fidelity Select Biotechnology Portfolio (FBIOX) aims for capital growth. The fund invests the majority of its assets in securities of companies primarily engaged in the research, development, manufacture and distribution of several biotechnological products and services. The fund also invests in companies that gain considerably from scientific and technological advancements in biotechnology. The non-diversified fund invests in U.S. and non-U.S. issuers.