Mutual fund star Ed Owens finds himself in an unusual position this year, at the back of the pack among competitors investing in healthcare stocks.
Owens works at Wellington Management in Boston but is best known as the manager of the $27 billion Vanguard Health Care Fund, the top-performing healthcare mutual fund over the past 10 years and a leader by many other long-term measures.
So far this year, Vanguard Health Care trails all but 11 of 70 comparable funds with a return of 3.86 percent through last week, according to Lipper Inc. - just less than half the average earned by healthcare sector funds for 2007.
The largest stocks in Vanguard Health Care's portfolio, which tilts heavily toward drug companies, have produced mixed results. The fund's largest holding, Schering-Plough Corp., has gained 24 percent this year and another large investment, McKesson Corp., has climbed 26.8 percent. Other top holdings have gotten clobbered, especially Forest Laboratories Inc. (down 26.8 percent) and AstraZeneca PLC (down 21.5 percent).
One of Vanguard Health Care's longtime competitors, the T. Rowe Price Health Sciences fund, is up nearly 15 percent this year. One reason: A smaller (45 percent) emphasis on drug stocks.
Vanguard Health Care's 2007 performance doesn't concern Dan Wiener, editor of the Independent Adviser for Vanguard Investors. Wiener, who also manages money and keeps about 10 percent of it in Vanguard Health Care, noted the fund poked along earlier this year but outperformed the market during rougher times this month.
"In any give quarter or six-month period it may look like it's underperforming, but it's doing precisely what we want it to do," he said. "It's a low volatility fund with high long-term returns."
And what about those long-term returns? Owens has run Vanguard Health Care since 1984 and earned an average of 18.4 percent a year, beating the market by more than 5 percentage points a year.
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Speaking of this month's rocky stock market, there is no shortage of local high-fliers taking their lumps in November.
Momenta Pharmaceuticals Inc., which got bad news from drug regulators last week, is the worst-performing Massachusetts stock this month with a decline of 60.3 percent. Momenta plunged from $13.01 at the start of the month to $5.16 yesterday.
Shares of Boston Beer Co., which hit an all-time high just weeks ago, have sunk 34 percent this month. Company earnings below Wall Street forecasts and caution about business ahead hurt the stock.
Two of the summer's hot initial public offerings are taking big November hits. Starent Networks Inc. has shed 27.4 percent of its value this month. Netezza Corp. shares are down 26.6 percent for November.
EMC Corp. shares, which had been climbing on the company's big ownership stake in VMware Inc., have given back 25.8 percent of their value this month. VMware, the hottest new stock in the market this year, has sunk 35.6 percent in November.
The Red Herring
Home of the whopper: Bain Capital and two other principal private equity investors are expected to sell more of their Burger King Corp. shares today. Bain and the other two equity firms bought Burger King for $1.5 billion five years ago but put up only about $100 million each at the time. They got their cash back in a special dividend before Burger King went public in 2006 and then sold $140 million worth of stock in a secondary offering nine months ago. Bain will probably raise another $192 million in today's sale and still hold about $470 million worth of Burger King stock.
BOSTON CAPITAL BLOG Steven Syre is a Globe columnist. Read his daily blog at boston.com/business. He can be reached at syre@globe.com.
