Health Stock Funds: Right Prescription in a Recession?

Davis gives high marks to Baxter International (BAX Quote). The company supplies a range of medical equipment and services used in hospitals to treat cancer and kidney disease. "Baxter has diverse business lines that are necessities for hospitals," says Davis.

For broad exposure to the entire health sector, consider Hartford Global Health. The fund has 25% of assets in biotechnology, 11% in pharmaceuticals, 24% in medical equipment and 11% in managed-care companies. Hartford seeks companies with improving market shares or promising product pipelines.

A favorite holding is McKesson Corp. (MCK Quote), which distributes drugs to pharmacies and hospitals. Big customers include Wal-Mart (WMT Quote) and the U.S. Department of Veterans Affairs. McKesson is a major seller of generic drugs, a growing segment of pharmaceutical markets. "McKesson should have stable earnings growth," says Gallo, Hartford Global Health's portfolio manager.

At a time of erratic markets, steady growers such as McKesson should become especially valuable.