7
Morningstar FundInvestor
September
2013
Morningstar Analyst Rating
08-26-13
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
173.71
143.27
128.73
122.40
120.22
101.44
138.63
145.60
139.45
126.79
120.57
96.16
Total Return %
24.28
15.11
11.45
6.16
20.96
-18.45
4.43
10.87
15.41
9.51
26.58
-11.36
+/-MSCI World
12.57
-0.72
16.99
-5.60
-9.03
22.26
-4.61
-9.20
5.92
-5.21
-6.53
8.53
+/-DJ Health
-1.36
-4.15
-0.30
1.64
-0.75
4.35
-3.93
3.99
7.09
4.96
7.15
9.45
Income Return %
0.03
2.14
1.84
1.69
1.74
1.40
1.91
1.54
1.23
0.93
1.04
0.82
Capital Return %
24.25
12.97
9.61
4.47
19.22
-19.85
2.52
9.33
14.18
8.58
25.54
-12.18
Total Rtn % Rank Cat
67
86
17
67
58
20
82
13
17
45
70
3
Income $
0.04
2.76
2.24
2.01
1.76
1.92
2.75
2.10
1.54
1.11
1.00
0.96
Capital Gains $
3.85
2.19
5.18
3.20
0.73
9.52
10.59
6.66
5.08
4.00
0.10
6.53
Expense Ratio %
0.35
0.35
0.35
0.36
0.29
0.26
0.25
0.25
0.21
0.28
0.29
0.31
Income Ratio %
1.94
1.72
1.67
1.73
1.64
1.78
1.33
1.29
1.02
0.91
0.86
0.84
Turnover Rate %
8
8
9
6
12
9
8
14
13
13
25
13
Net Assets $mil
8,850
8,143
8,223
8,426
11,755
10,753
14,965
16,329
16,787
19,606
17,645
13,752
Performance
08-31-13
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
. . .
Trailing
Total +/- MSCI
+/- DJ %Rank Growth of
Return% World
Health
Cat
$10,000
3 Mo
6 Mo
1 Yr
3 Yr Avg
5 Yr Avg
10 Yr Avg
15 Yr Avg
3.88 3.39
0.75
64 10,388
15.22 9.10
-0.12
70 11,522
28.76 11.13
-1.23
73 12,876
21.59 8.26
-2.36
61 17,976
11.63 7.51
0.04
42 17,334
10.80 3.68
1.86
39 27,887
12.33 7.42
4.70
29 57,205
Tax Analysis
Tax-Adj Rtn% %Rank Cat Tax-Cost Rat %Rank Cat
3 Yr (estimated)
5 Yr (estimated)
10 Yr (estimated)
20.56
62
0.84
50
10.63
45
0.89
74
9.82
39
0.88
70
Potential Capital Gain Exposure: 55% of assets
Rating and Risk
Time Load-Adj
Morningstar
Morningstar
Morningstar
Period Return % Rtn vs Cat
Risk vs Cat
Risk-Adj Rating
1 Yr
28.76
3 Yr
21.59
Avg
Low
5 Yr
11.63
Avg
Low
10 Yr
10.80
Avg
Low
Incept
16.72
Other Measures
Standard Index
Best Fit Index
MSCI World M* SEC/Healthcare
Alpha
12.1
0.8
Beta
0.59
0.85
R-Squared
71
97
Standard Deviation
10.54
Mean
21.59
Sharpe Ratio
1.91
Morningstar’s Take
by Flynn Murphy 08-26-13
New management is settling in here.
Although Vanguard Health Care’s long-tenured
skipper, Ed Owens, retired in 2012, much remains the
same. The fund’s new lead manager, Jean Hynes,
worked alongside Owens since 1992 and has
comanaged this fund since 2008. Hynes will continue
to ply this fund’s patient, value-minded approach,
buying out-of-favor health-care stocks and holding on
to them for the long haul. Hynes has the support of an
experienced Wellington team, including Ann Gallo, Kirk
Mayer, and Robert Deresiewicz, who have comanaged
Hartford Healthcare HGHAX with Hynes since 2000,
tallying a solid long-term record.
Since Owens’ departure, subadvisor Wellington has
made changes, adding three analysts to its health-care
team in early 2013, promoting an associate to take part
of Hynes’ biotech and pharmaceutical coverage list,
and hiring two experienced analysts specializing in
pharmaceuticals and health-care services.
Hynes has also made some portfolio changes. She’s
less concerned about broad macroeconomic headwinds
than was Owens. As a result, cash dropped from an
average of 7% during Owens’ final decade as manager
to less than 2% by mid-2013. Hynes is also expanding
the number of holdings from 70-80 under Owens to
90-100 in an attempt to add more value and further
mute volatility. Accordingly, the typically low-turnover
fund added several new stocks in 2013’s first quarter,
including DNA-sequencing firm Illumina ILMN and
drug manufacturer Mylan MYL.
While the fund has smoothly transitioned
managers, its girth may challenge Hynes. The fund’s
$30 billion asset base towers over health-care peers
and contributes to the fund’s relatively low active
share--a measure of the portfolio’s divergence from its
MSCI ACWI Health Care Index benchmark. But the
team backing this fund has succeeded thus far: Since
Hynes joined the fund as a comanager in 2008, it has
handily outpaced the benchmark through Aug. 20,
2013. The fund has the resources in place to continue
its success, and a bargain expense ratio adds to its
appeal.
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:
0.33%
Actual Fees:
Mgt:0.33% Dist:
.
Expense Projections:
3Yr:$113
5Yr:$197 10Yr:$443
Income Distribution:
None
Data through August 31, 2013
Vanguard Health Care Inv
Ticker
Status Yield Total Assets
Mstar Category
VGHCX Open
1.5% $29,305 mil
Health
90% 92% 93% 94% 90% 93% 93% 92% 96%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 08-13
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 World
Performance Quartile
(within Category)
History
10.0
7.0
14.0
18.0
22.8
Portfolio Analysis
06-30-13
Share change since 03-13 Total Stocks:91 Sector
PE Tot Ret% % Assets
Merck & Co Inc
Hlth care 28.1 17.61 5.90
UnitedHealth Group Inc
Hlth care 13.6 33.17 4.62
Forest Laboratories, Inc
Hlth care
.
20.41 3.87
Amgen Inc
Hlth care 18.4 28.02 3.75
Roche Holding AG
Hlth care 17.8 27.53 3.65
McKesson, Inc.
Hlth care 20.9 25.88 3.46
Bristol-Myers Squibb Com
Hlth care 51.0 31.14 3.22
Eli Lilly and Company
Hlth care 11.5 7.20 2.77
Astellas Pharma, Inc.
Hlth care
. .
2.76
AstraZeneca PLC
Hlth care
. .
2.67
Pfizer Inc
Hlth care 18.6 15.35 2.37
WellPoint Inc
Hlth care 9.3 40.99 2.23
Humana
Hlth care 9.8 34.94 2.12
Walgreen Company
Cnsmr Def 21.1 32.22 1.95
Medtronic, Inc.
Hlth care 15.4 27.47 1.92
Cerner Corporation
Technology 37.5 18.85 1.83
Cigna Corp
Hlth care 15.6 47.27 1.79
UCB SA
Hlth care
. .
1.77
Vertex Pharmaceuticals
Hlth care
.
79.36 1.69
Teva Pharmaceutical Indu
Hlth care 78.7 4.53 1.58
Current Investment Style
Market Cap %
Giant
38.3
Large
37.9
Mid
21.1
Small
2.6
Micro
0.0
Avg $mil:
29,792
Value Blnd Growth
Large Mid Small
Value Measures
Rel Category
Price/Earnings
Price/Book
Price/Sales
Price/Cash Flow
Dividend Yield %
17.06
2.43
1.05
11.69
1.95
0.89
0.78
0.48
0.91
1.59
Growth Measures
% Rel Category
Long-Term Erngs
Book Value
Sales
Cash Flow
Historical Erngs
9.38
7.91
6.91
1.68
3.76
0.75
0.91
0.72
0.24
0.08
Profitability
% Rel Category
Return on Equity
Return on Assets
Net Margin
16.16
6.44
9.73
1.46
2.86
1.06
Industry
Weightings
% of
Stocks
Rel
Cat
Biotech
15.4
0.4
Drugs
36.9
1.4
Mgd Care
17.4
2.0
Hospitals
3.1
1.1
Other HC Srv
0.0
0.0
Diagnostics
3.0
0.5
Equipment
17.2
1.5
Good/Srv
4.2
0.8
Other
2.8
1.1
Composition - Net
(% of Stock)
Cash
0.0
Stocks 96.3
Bonds 0.0
Other
3.7
Foreign 22.9
©
2013Morningstar, Inc.All rights reserved. The information herein isnot represented orwarranted to be accurate, correct, complete or
timely. Pastperformance isnoguarantee of future results.Access updated reports at
To order reprints, call 312-696-6100.
mfb.morningstar.com.
Mutual Funds
ß
®
EQ
