Genes are hot.
The biotechnology sector started to take off last year and has gained more momentum into 2000. Since the beginning of the year, the
American Stock Exchange's Biotechnology Index
has soared 34.3% (through Feb. 10), while the
has fallen 3.6%.
By buying biotech now, you're jumping into an already frothy and consistently volatile area of the market.
But if you want biotech, then buy biotech. Why bother with a diversified fund that might own companies that make medical devices or manage hospitals?
offers the oldest of all the funds in this sector:
This fund, which opened in late 1985, has years on its younger rivals. Its 10-year average annual return (through the end of January) of 27.4% beats the S&P 500's 10-year annualized performance by nine percentage points.
With a track record like that, this fund has seen it all and has proven it can survive the roughest of times in this very unpredictable sector.
Better yet, the fund is backed by Fidelity's massive research effort. The Boston firm employs more than 200 equity analysts and more than 60 portfolio managers. Fidelity manages more than $1 trillion in assets. A firm of that girth and power would certainly get the best access to companies.
Granted, manager Yolanda McGettigan has run the fund only since the beginning of this month. But with Fidelity's research might behind the fund, investors shouldn't worry about a new manager at the helm.
Besides, the composition of the fund should give investors additional confidence. The fund tends to own the larger, better-established biotech names like
If you owned biotech, you'd want to own the kings of the industry, and this fund is the reigning ruler.
Joe Bousquin's infatuation with the
Janus Global Life Sciences fund is understandable. The performance of the firm's funds during the 1990s has been impeccable. Global Life Sciences also has done well -- up 123% for the past year.
But that one year is all you get to look at.
The fund made its debut at the very end of 1998 and is an infant compared with Fidelity's great-grandfather of a portfolio.
As the name of the Janus fund indicates, it doesn't buy just biotech. At the end of the year, the fund had 21.5% of its assets in drug stocks and also had money in HMOs, optical supplies, medical instruments and other sectors.
Lastly, the Janus fund concentrates its bets in a small number of stocks. It owned just 39 stocks at the end of October, while Fidelity Select Biotech fund owned 78 stocks at the end of the year.
If you want to own the sector, buy a fund that can guarantee that it owns primarily biotech. Janus Global Life Sciences can't and doesn't.