My current favorite sector...health care
I often disagree with what Michael Santoli has to say in his weekly Barron's column, so much so that I often wonder why it is so prominently displayed at the front of the magazine. Having said that, Mr. Santoli's article in this week's issue was outstanding. I believe that he hit the nail right on the head when he talked about the attractiveness of the health care sector right now.
I'm not wild about insurance companies, there's too much political risk there for me. However a lot more to health care than insurance. A ton of high quality health care companies have lagged the market in our recent rally.
According to the Barron's piece, the S&P 500's health-care sector currently trades for less than twelve times its expected earnings for both 2009 and 2010. This is the sector's largest earnings multiple discount relative to the S&P 500 as a whole in more than two decades.
I personally have been adding money to my investment in my favorite pharma company (which unfortunately has to remain nameless for now) over the past several months. Santoli singles out two foreign pharma companies as being attractive in his article, Roche (RHHBY) and AstraZeneca (AZN). These two have have underperformed their European benchmark by a whopping 25% over the past half year. Since 1987 this sector has always snapped back sharply during the next six month period after such underperformance.
The article also speaks favorably about two medical-products companies, businesses as Baxter International (BAX) and Becton Dickinson (BDX).
I am not intimately familiar with the four, but at first glance AZN is the one that appeals to me the most.