Eric Aanes, president of Titus Wealth Management, concurs with Yockey that valuations in the sector have improved. "Health care is a good defensive play," he said. "It has been long overdue and valuations are attractive in the sector."
Aanes prefers some of the large-cap pharmaceutical companies over health care providers, including
. "The stock has a good dividend yield that is now in excess of 7% and the company has a strong balance sheet," he said.
Aanes also likes drug manufacturer
Teva Pharmaceutical Industries
. In late July, Teva reported second-quarter results that included a 3% increase in EPS on an 18% spike in net sales vs. a year earlier. The company benefited from new product launches in the U.S. and strong international sales growth.
Paul Alan Davis, a manager of the
Schwab Health Care Fund
, says that relative to other sectors, health care should be a safer area of the market at least until mid-2009. The manager, whose fund has fallen 30% this year, is underweight in managed-care companies. SWHFX has outperformed 92% of its peers over the past five years.
Two positions in the space that Davis has held on to are Aetna and
. "Their fundamentals are showing the ability to generate strong cash flows," he said. "Both companies are repurchasing shares and have done a good job with the timing of their repurchases."
The focus on fighting rising medical costs is a trend that has led to opportunities for Davis. Two of his top 25 holdings that also play a prominent role in IHF include Medco Health Solutions and
. "We are continuing to hold pharmacy benefit managers," he said. "Being involved in medical-cost containment, they are positioned for increased positive attention."