Fund Manager Reed Picks 'Obama' Stocks

President Barack Obama's health-care plan remains a mystery now that Tom Daschle has stepped aside as a Cabinet candidate. But that's not stopping fund manager Jim Reed from picking away at Obama-friendly health-care stocks.

"We really don't know what the outline of the plan is going to be, but there are three things you can do to prepare: buy 'razor blade' companies, buy growth companies and buy well-diversified consumer franchises," says Reed.

Reed, who oversees the UMB Scout Stock Fund(UMBSX), says the best opportunities and valuations are in health-care stocks that will benefit under Obama. Reed's fund holds $110 million in assets spread across about 60 stocks, according to Morningstar. While the fund has lost an average of 20 basis points annually over the past five years, that's more than 4 percentage points better than the S&P 500 and enough to merit Morningstar's top rating of five stars. The fund is in the top 3% of its peer ranking, Morningstar data show.

In the "razor blade" category, a term used to describe everyday products often in need of replacement, Reed favors stent and angioplasty needle provider CR Bard(BCR), which he says has a low reimbursement risk from the government.

Among growth companies, Reed likes Gilead Sciences(GILD) for its strength in HIV treatments.

"Gilead is a riskier name, but it's the premier HIV franchise," says Reed. "One of their key drivers is that states are now making patients sign-off not to have an HIV test in the emergency room, and in California alone that led to a significant increase in volumes. That program will soon sweep across the country, much to Gilead's benefit."