TIP SHEET: T. Rowe Price Fund Scans Health-Care Services

T. Rowe Price Health Sciences Fund (PRHSX) manager Kris Jenner is on the hunt for investment ideas in health-care services after getting a big boost from biotechnology stocks last year.

About a third of the $5 billion fund is invested in biotech names, and while major alterations are unlikely, Dr. Jenner believes last year's biotech surge will be hard to replicate. So in the run-up to big changes under the health-care overhaul law, the fund's team is looking at companies that provide, manage and pay for care.

There are "several sectors to look at," Dr. Jenner said.

Services companies include hospitals, insurers, pharmacy-benefit managers and others. The health overhaul for these companies really kicks into gear next year, when coverage extends to millions of Americans, creating a menagerie of new opportunities and pressures for health companies.

"Fundamentally you're going to have more patients in the health-care system, you're going to have greater payments in the health-care system," but also new costs, Dr. Jenner said.

Recent T. Rowe Price Group Inc. (TROW) data show nearly 27% of the fund invested in services, a third in biotechnology, 22% in pharmaceuticals, 14% in products and devices and a small sliver in life sciences.

Dr. Jenner believes there could be modest changes in this make-up, although he cautioned they won't be "wholesale." The manager--who has run the fund for 13 years--has a long-running interest in companies bringing new and important drugs to market.

The fund has posted total returns of nearly 31% over the last year, about nine percentage points ahead of similar funds, and well ahead of the Standard & Poor's 500 index, according to Morningstar, which awards it a full five-star rating. The fund has also outperformed peers and the broader market on a three-, five- and ten-year basis.

The ride can be bouncy along the way, Morningstar analyst Christopher Davis cautioned, because of Dr. Jenner's interest in smaller biotech firms that have more hanging on single projects than big companies. But overall, the fund's "ample rewards more than match its risks," Mr. Davis said in a recent review.

Dr. Jenner's biotech focus was richly rewarded last year, when the sector benefited from advances in drug pipelines, regulatory approvals and continued merger and acquisition activity. The NASDAQ Biotechnology Index rose 32% on the year, more than doubling gains in the S&P 500.

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TIP SHEET: T. Rowe Price Fund Scans Health-Care Services