Health Care Could Be the Best Medicine

I'm more than a little puzzled by this continued obsession with technology stocks and the Nasdaq. If that were the only spot to sock your money, maybe I'd understand it. But when other segments of the market have seen very little, if any, weakening in their fundamentals, have excellent earnings visibility and are close to making new highs, I just don't get it.

It's rather perverse that many market participants continue to try to call a bottom for the Nasdaq and many of these stocks ahead of the fundamental picture's improvement. After all, you can still buy stocks in other groups with solid and improving fundamentals and reasonable immunity to a downturn.

Positive Attributes

One obvious candidate is the hospital group. I'm sure I'll be accused of having a bias; after all, I do run a health care fund and have been in the health care business for more than 25 years. Nevertheless, I believe this group exhibits many characteristics that you should be looking for in an investment now.

Hospital companies continue to show strong fundamentals, which are expected to remain solid for the foreseeable future. Although the first-quarter flu season was much weaker than normal, secular trends in the industry continue to support strong demand for hospital services.

These companies also have been successful in negotiating solid rate increases in their managed-care contracts, while holding costs firmly in control. I expect that will generate continued margin improvement. In addition, after many, many years of adverse political oversight, the current political environment appears to be friendly and supportive, which also should bode well for continued share-price improvement.

Earnings Stream In

Some of the industry's major players began issuing their quarterly earnings reports Friday, with Tenet Healthcare (THC Quote - Cramer on THC - Stock Picks) setting the tone. The rest of the group is slated to report between now and early April. Tenet's earnings are a good indicator of what's to come, as the company handily beat consensus estimates by 2 cents a share.

Tenet's back-to-basics business strategy seems to provide impressive results, which "have never been better," the company reports. It posted record same-facility revenue that was up 8.3%, quarterly revenue that hit $3.04 billion and EBITDA , a measure of cash flow, that rose 15.6% to $578 million.

Similarly strong results are expected among the other hospital companies, such as The Healthcare Co. (HCA Quote - Cramer on HCA - Stock Picks), Community Health Systems (CYH Quote - Cramer on CYH - Stock Picks), Lifepoint Hospitals (LPNT Quote - Cramer on LPNT - Stock Picks), Health Management Associates (HMA Quote - Cramer on HMA - Stock Picks), Province Healthcare (PRHC Quote - Cramer on PRHC - Stock Picks), Triad Hospitals (TRIH Quote - Cramer on TRIH - Stock Picks) and Universal Health Services (UHS Quote - Cramer on UHS - Stock Picks).

Instead of rolling the dice and guessing if and when the fundamental picture will improve for tech stocks, leave the gambling for a Las Vegas trip. Consider investing in companies with solid fundamentals and excellent visibility.