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
"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
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
, which he says has a low reimbursement risk from the government.
Among growth companies, Reed likes
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."
The new president's love of technology -- just try and take that
away from him -- is a prime reason for Reed's decision to own shares of hospital back-office provider
"Cerner is an IT provider taking advantage of the digitization of health care," says Reed. "They take all the paper out of the hospital and pharmacy. And they have experience with national health-care programs after fulfilling large contracts in England."
As for the future of large pharmaceutical companies under an Obama administration, Reed expects more mega-mergers like the $68 billion deal that is bringing together
"Companies will be putting huge packages together because they know formularies (lists of drugs paid for by health plans) are coming along," says Reed. "What better way to face the government than to say, 'If you are not going to put us on the formulary, then there are only going to be two of us left.' "
Before joining TheStreet.com, Gregg Greenberg was a writer and segment producer for CNBC's Closing Bell. He previously worked at FleetBoston and Lehman Brothers in their Private Client Services divisions, covering high net-worth individuals and midsize hedge funds. Greenberg attended New York University's School of Business and Economic Reporting. He also has an M.B.A. from Cornell University's Johnson School of Business, and a B.A. in history from Amherst College.