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Professor Buffett's Health Care Trade

NEW YORK ( TheStreet) -- Warren Buffett cut through the fog of uncertainty surrounding the health care sector and increased his stake in the sector by buying Becton, Dickinson (BDX - Get Report) and Johnson & Johnson (JNJ - Get Report).

An Aug. 14 regulatory filing revealed that Buffett's Berkshire Hathaway (BRK-A) had 1.2 million shares of BDX at the end of the second quarter, and had increased its position in JNJ.

Health care reform, a key issue for President Obama, has sputtered to a virtual standstill. The prospect of new legislation has bullied the healthcare sector since before election day, sending everything from healthcare providers to pharmaceuticals on a wild ride. The debate has caught fire in the last few months, and the smoke has obscured significant recovery in healthcare stocks.

It's been a rocky road for Buffett's 1.2 million shares of BDX and 36.9 million shares of JNJ. BDX, which climbed 6.1 percent in the three months ended June 30 to $71.31, settled to $69.83 as of yesterday's close. JNJ has also climbed steadily upward in 2009.

The first commandment of Buffett investing, however, is to buy solid companies at fair prices, and not get mired down in short-term fluctuations. The recent voices in the health care debate have reached a roar, and it is tempting for investors to put their hands over their ears and keep their heads down.

The stark reality, however, which Buffett has keenly grasped, is that America is aging. As baby boomers reach retirement and old age, their numbers will affect nearly every sector in the economy. No matter what packaging healthcare assumes, it is certain that we will need more of it.

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WLP $136.01 1.43%
BDX $141.53 0.00%
IBB $356.46 0.00%
JNJ $99.58 0.00%
PPH $71.52 0.00%


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