Zagunis thinks demographic trends should support
(SYK - Get Report)
, a knee- and hip-implant specialist, as the American population gets older. "The addition with Stryker is that they have a remarkably strong balance sheet with over $10 in cash per share on their balance sheet and no debt. They also have expansion plans that support performance in the next several years."
Liss agrees with the "aging of America" argument, but prefers
"They are both good companies, but we are more disposed to Zimmer because they are more of the pure play on orthopedics," Liss says. "They have 75% of their business coming from hips and knees. They have a very good balance sheet and a good market-share position. And we think they are going to benefit from the new health-care law as more people gain eligibility and can utilize those products."
As for the specter of so-called "ObamaCare" that weighed on the sector throughout 2010, Liss believes
(UNH - Get Report)
could actually stand to benefit as the new legislation takes effect.
"It's actually going to be pretty good for UnitedHealth coming out of this because they are going to have a lot of opportunity to get new lives under their care," Liss says. "We are talking about 30 million people who will most likely be insured going out to 2019. It will start to pick up in 2014 when the major provisions of the health-care law kick in."
He adds, "They have a great market-share position in Medicare Advantage, and the cuts there have been overblown. They have been able to manage through that pretty well."
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