2 Mutual Funds Holding Hospital Stocks

Health care continues to be the leading S&P sector year-to-date, as well as over the past three months.

Within health care, the sub-sector of hospitals is holding a leadership position at the beginning of October. A leading performer has been HCA Holdings Inc. HCA, which has advanced nearly 50 percent year-to-date.

Vanguard Health Care

The Vanguard Health Care Fund VGHCX owns 1.56 percent of HCA shares, accounting for 1.02 percent of fund assets. This is a huge sector fund, with assets of $40.7 billion. Its Net Asset Value is $213.66. The fund has gained 14.16 percent so far in 2014.

HCA is not even one of the top holdings in the Vanguard Health Care fund; those honors go to Merck & Co., Inc. MRK, Bristol-Myers Squibb Co. BMY and UnitedHealth Group, Inc. UNH.

Fidelity Select Medical Delivery

For more targeted exposure to the hospital industry, investors might want to look at the Fidelity Select Medical Delivery Portfolio FSHCX.

The fund seeks to invest at least 80 percent of its assets in stocks of hospitals, nursing homes, health maintenance organizations, or other health-care-delivery companies.

The fund has a net asset value of $79.31 and assets of $729 million. It stands to reason that a very targeted sub-sector fund would be smaller than a fund with much broader sector exposure, such as the Vanguard Health Care fund. In fact, this fund only holds 47 stocks.

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The Fidelity Select Medical Delivery Portfolio has advanced 8.72 percent year-to-date. The top holdings are: UnitedHealth Group, 15.68 percent of fund assets; Express Scripts Holding Co. ESRX, 12.49 percent of fund assets; McKesson Corp MCK, 9.09 percent of fund assets; Cardinal Health Inc CAH; HCA, 5.87 percent of fund assets; and Cigna Corp CI, 4.67 percent of fund assets.

The expense ratio on this fund is 0.82 percent, not at all exorbitant. Investors should be prepared to re-balance or sell and take profits if they are investing in a specific sub-sector, such as health-care delivery.