Industry Fund Profile – Biotechnology

With many Investor Relations professional seeking ways to uncover new investors, Alliance Advisors decided to focus on the Biotechnology industry for a bit of analysis. We reviewed mutual fund holdings within our innovative investor intelligence platform, Invictus®, to understand which mutual funds were the most bullish supporters of the Biotechnology industry. The first thing that jumped out to us was The Capital Group Companies’ fund family dominated the largest industry capital increases. Their funds accounted for the eight largest increase by dollar value in the Biotechnology industry, though their investments in the industry were very concentrated. The largest purchase was made by the American Funds Growth Fund of America managed by a team of 12 portfolio managers. Overall, the funds’ investment in the Healthcare sector ranks third, representing 14%, trailing only Information Technology (24.5%) and the Consumer Discretionary (15.7%) sectors. The management team commented about the fund’s quarterly performance, “Health care holdings sold off with biotech companies declining the most,” suggesting that they took the opportunity to buy into the weakness. All told, the fund increased exposure to Biotechnology by 84%.

The fund with the largest holding of Biotechnology stocks was the American Funds Insurance Series – Growth Fund, holding 6 in all. The fund’s management team was most bullish on Illumina, accumulating 1.29 million shares to build its stake to 1.36 million shares. When delving deeper into this trend, the primary driver of the firm-wide exposure increase to Biotech stocks was its affinity for Amgen, which accounted for the largest purchase in four of the eight, followed by Illumina representing the largest purchase in three of the eight.

We next looked at the funds with the largest percentage increase to Biotechnology stocks, and a different trend appeared. When focusing on funds with updated holdings through end of January, Fidelity emerged as a firm who had multiple funds (3) in rank among the top eight.

The Fidelity Growth Discovery Fund made the largest increase in industry investment, adding >15%, primarily driven by increased holdings of Moderna. Co-managers Asher Anolic and Jason Weiner commented that their bias toward stocks of companies that can grow earnings faster than the market detracted from the fund’s performance versus the benchmark for the past six months. Specifically, their decisions to overweight the health care sector and underweight consumer discretionary significantly hurt the fund’s relative result. Asher Anolic elaborated on the fund’s investments in the health care sector saying, “In 2024, we added to the fund’s stake in health care stocks, making it the largest sector overweight by a wide margin. Health care stocks had a bumpy stretch the past year, outshined by high-growth megatrends, especially AI, and held back by pandemic-related headwinds and policy uncertainty in an election year. Still, innovation continued, particularly among biotech companies, and the pullback among certain stocks in the sector provided us with opportunities to establish or increase holdings in some promising names at attractive prices.”

Asher is also a portfolio manager of the Fidelity VIP – Growth Portfolio as well as the Fidelity Advisor Equity Growth Fund which were the other two Fidelity funds increasing exposure to the Biotechnology industry. Of the later fund, Asher commented that at the end of 2024, health care was by far the biggest sector overweight. Instead of making macroeconomic calls, “we plan to remain focused on areas of the market that are driven by salient secular trends we think can lead to long-term growth, such as growth-oriented segments of the technology sector and innovative businesses in health care.” Among the10 funds Asher manages, Gilead Sciences and BioNTech are the largest biotechnology stock exposures.

Alliance Advisors help hundreds of companies with shareholder intelligence, ranging from proxy advice and governance analytics to shareholder identification and targeting. Our ability to identify investment trends within the institutional investment community enables our clients to efficiently and effectively prioritize which existing and potentially new shareholders to engage.