6
Morningstar Analyst Rating
03-27-14
Œ
Morningstar Pillars
Process
Performance
People
Parent
Price
Positive
Positive
Positive
Positive
Positive
Morningstar Analyst Rating
Morningstar evaluates mutual funds based on five key pillars, which
its analysts believe lead to funds that are more likely to outperform
over the long term on a risk-adjusted basis.
Analyst Rating Spectrum
Œ „ ´ˇ ¨
Pillar Spectrum
Positive
§
Negative
¶
Neutral
NAV
195.23
187.16
143.27
128.73
122.40
120.22
101.44
138.63
145.60
139.45
126.79
120.57
Total Return %
8.84
43.19
15.11
11.45
6.16
20.96
-18.45
4.43
10.87
15.41
9.51
26.58
+/-MSCI Ac Wrld ND
7.76
20.39
-1.02
18.80
-6.51
-13.67
23.74
-7.23
-10.08
4.57
-5.72
-7.41
+/-S&P 1500 Hlth Care TR
3.45
1.00
-3.24
-0.43
0.96
0.20
5.31
-3.59
3.90
7.92
6.17
8.95
Income Return %
0.09
1.69
2.14
1.84
1.69
1.74
1.40
1.91
1.54
1.23
0.93
1.04
Capital Return %
8.75
41.50
12.97
9.61
4.47
19.22
-19.85
2.52
9.33
14.18
8.58
25.54
Total Rtn % Rank Cat
10
69
86
17
67
58
20
82
13
17
45
70
Income $
0.17
2.36
2.76
2.24
2.01
1.76
1.92
2.75
2.10
1.54
1.11
1.00
Capital Gains $
8.28
14.00
2.19
5.18
3.20
0.73
9.52
10.59
6.66
5.08
4.00
0.10
Expense Ratio %
0.35
0.35
0.35
0.35
0.36
0.29
0.26
0.25
0.25
0.21
0.28
0.29
Income Ratio %
1.33
1.94
1.72
1.67
1.73
1.64
1.78
1.33
1.29
1.02
0.91
0.86
Turnover Rate %
21
8
8
9
6
12
9
8
14
13
.
25
Net Assets $mil
10,515
9,636
8,143
8,223
8,426
11,755
10,753
14,965
16,329
16,787
19,606
17,645
Performance
03-31-14
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
Total
2009
2010
2011
2012
2013
-7.98 10.59 11.29 6.81 20.96
2.94 -9.04
8.78 4.23
6.16
6.64 8.01
-9.28 6.66 11.45
7.93 1.38
5.27 -0.07 15.11
14.46 4.98
7.56 10.80 43.19
Trailing
Total +/- MSCI
+/- S&P %Rank Growth of
Return%Ac Wrld ND 1500 Hlth Care TR
Cat
$10,000
3 Mo
6 Mo
1 Yr
3 Yr Avg
5 Yr Avg
10 Yr Avg
15 Yr Avg
8.84 7.76
3.45
10 10,884
20.59 12.11
4.51
7 12,059
36.16 19.61
6.71
47 13,616
23.31 14.76
0.25
39 18,750
22.78 4.98
0.42
52 27,902
11.64 4.67
2.23
42 30,074
11.89 7.48
5.33
21 53,935
Tax Analysis
Tax-Adj Rtn% %Rank Cat Tax-Cost Rat %Rank Cat
3 Yr (estimated)
5 Yr (estimated)
10 Yr (estimated)
21.32
41
1.61
58
21.33
51
1.18
64
10.36
43
1.14
68
Potential Capital Gain Exposure: 48% of assets
Rating and Risk
Time Load-Adj
Morningstar
Morningstar
Morningstar
Period Return % Rtn vs Cat
Risk vs Cat
Risk-Adj Rating
1 Yr
36.16
3 Yr
23.31
Avg
Low
5 Yr
22.78
Avg
Low
10 Yr
11.64
Avg
Low
Incept
17.26
Other Measures
Standard Index
Best Fit Index
MSCI Ac Wrld ND
DJ Health
Alpha
16.6
2.3
Beta
0.55
0.88
R-Squared
56
93
Standard Deviation
10.66
Mean
23.31
Sharpe Ratio
2.03
Morningstar’s Take
by Flynn Murphy 03-27-14
Vanguard Health Care’s steady approach holds up over
the long haul.
There’s a capable team behind this fund. Although
its longtime leader, Ed Owens, retired in 2012, the
fund’s new lead manager, Jean Hynes, worked with
Owens since 1992 and has comanaged this offering
since 2008. Hynes is part of a team of four managers
that has run Hartford Healthcare HGHAX with
peer-beating results since 2000. Hynes is
well-positioned to employ the same value-focused
approach that Owens plied here for two decades.
Hynes has made some tweaks to Owens’ process.
At times, Owens raised cash to 15%-25% of assets
when he believed macroeconomic headwinds were
rising. Hynes is less inclined to make those macro
calls. She dropped the fund’s cash stake to less than
1% in 2013 and intends to run the fund close to fully
invested. Hynes also expanded the number of holdings
to 90 from roughly 70 during 2013, adding some growth
stocks such as biotech firm Incyte INCY. However, the
fund still retains its value bias: its trailing 12-month
price/earnings and price/book ratios fell well below
the benchmark MSCI ACWI Health Care Index’s and
the typical health-care category peer’s at the end of
2013.
The fund favors large drug companies such as
Merck MRK, which has a strong pipeline and room for
global growth, according to Hynes. Relative to peers,
the fund has been light on biotechnology stocks, based
partly on concerns about the industry’s many
speculative and pricey names. The fund’s biotech
underweighting dampened returns on a relative basis
in 2012 and 2013 as the Nasdaq Biotechnology Index
trounced most broad-based health-care funds,
including this offering.
Still, this fund has delivered attractive risk-adjusted
returns over time. Since Hynes became a comanager
in 2008, the fund has rarely led peers during market
rallies, but it has suffered just 81% of its typical peer’s
losses during declines. Under Hynes, the fund also
beat its benchmark through March 21, 2014, with less
volatility. This remains a solid health-care offering.
Address:
Po Box 2600
Valley Forge, PA 19482
800-662-7447
Web Address:
Inception:
05-23-84
Advisor:
Wellington Management Company, LLP
Subadvisor:
None
NTF Plans:
Vanguard NTF
Minimum Purchase:
$3000
Add: $100 IRA: $0
Min Auto Inv Plan:
$0
Add: $100
Sales Fees:
No-load
Management Fee:
0.16% mx./0.14% mn.
Actual Fees:
Mgt:0.33% Dist:
.
Expense Projections:
3Yr:$113
5Yr:$197 10Yr:$443
Income Distribution:
None
Data through March 31, 2014
Vanguard Health Care Inv
Ticker
Status Yield Total Assets
Mstar Category
VGHCX Open
1.2% $37,083 mil
Health
92% 93% 94% 90% 93% 93% 92% 96%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 03-14
Historical Profile
Return
Risk
Rating
Average
Low
Above Avg
Investment Style
Equity
Stock %
Manager Change
Partial Manager Change
Growth of $10,000
Investment Values of
Fund
Investment Values of
MSCI Ac Wrld ND
Performance Quartile
(within Category)
History
10.0
17.0
24.0
31.0
Portfolio Analysis
12-31-13
Share change since 09-13 Total Stocks:93 Sector
PE Tot Ret% % Assets
Merck & Co Inc
Hlth care 38.6 13.87 5.41
Forest Laboratories, Inc
Hlth care
.
62.54 4.73
UnitedHealth Group Inc
Hlth care 14.9 9.26 4.45
Bristol-Myers Squibb Com
Hlth care 33.7 -2.26 3.84
McKesson Corp
Hlth care 33.2 9.85 3.56
Eli Lilly and Company
Hlth care 13.8 17.84 3.45
Roche Holding AG
Hlth care 21.1 8.82 3.45
AstraZeneca PLC
Hlth care 18.5 18.95 3.34
Amgen Inc
Hlth care 18.7 9.25 2.96
Astellas Pharma, Inc.
Hlth care 6.8 3.05 2.41
Vertex Pharmaceuticals I
Hlth care
.
8.83 2.41
UCB SA
Hlth care
. .
2.06
Humana
Hlth care 14.5 8.95 2.03
Walgreen Company
Cnsmr Def 23.2 15.50 1.85
Medtronic, Inc.
Hlth care 15.9 3.26 1.79
Cerner Corporation
Technology 54.4 10.10 1.77
WellPoint Inc
Hlth care 11.5 8.22 1.73
Cigna Corp
Hlth care 15.4 -9.02 1.57
Teva Pharmaceutical Indu
Hlth care 33.4 25.21 1.56
Perrigo Company PLC
Hlth care 61.7 7.22 1.40
Current Investment Style
Market Cap %
Giant
35.0
Large
49.4
Mid
12.5
Small
3.0
Micro
0.0
Avg $mil:
31,288
Value Blnd Growth
Large Mid Small
Value Measures
Rel Category
Price/Earnings
Price/Book
Price/Sales
Price/Cash Flow
Dividend Yield %
19.03
2.97
1.33
13.20
1.67
0.99
0.95
0.60
1.03
1.36
Growth Measures
% Rel Category
Long-Term Erngs
Book Value
Sales
Cash Flow
Historical Erngs
9.29
6.69
7.00
1.01
2.09
0.75
0.77
0.73
0.15
0.04
Profitability
% Rel Category
Return on Equity
Return on Assets
Net Margin
14.94
6.11
9.48
1.35
2.72
1.03
Industry
Weightings
% of
Stocks
Rel
Cat
Biotech
14.8
0.4
Drugs
38.8
1.3
Mgd Care
15.9
2.1
Hospitals
1.8
0.7
Other HC Srv
0.0
0.0
Diagnostics
3.3
0.8
Equipment
17.6
1.5
Good/Srv
4.5
0.9
Other
3.3
1.5
Composition - Net
(% of Stock)
Cash
0.3
Stocks 95.7
Bonds 0.0
Other
4.0
Foreign 24.9
©
2014Morningstar, Inc.All rights reserved.The informationherein is not represented orwarranted tobeaccurate, correct, completeor
timely. Pastperformance is no guarantee of future results.Access updated reportsat
Toorder reprints, call312-696-6100.
mfb.morningstar.com.
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