This week, in our focus on the winning analysts in each industry category from our
Analyst Rankings -- Equity 2000
, we profile the top analysts tracking health care distributors and services. Next week we'll look at health care facilities. (Our last focus was on
After a banner year in 2000, with returns topping 100%, all three of our top-ranked analysts remain positive on the health care distributors, at least in the near term. The group, which supplies hospitals, nursing homes, pharmacies and the like with everything from wholesale pharmaceuticals and medical supplies to information systems, has benefited both from a favorable environment and from investors seeking refuge in defensive sectors. While none of these analysts expect a repeat performance of last year's spectacular numbers, they project performance ranging from 15% to 25%. They warn, though, that investors should brace themselves for some volatility, particularly around the Medicare drug benefit debate.
On the whole, these companies have strong fundamentals. First-place analyst Larry Marsh of
sees several positives for the group, including better financial health for most hospitals, more consistent pricing since 1998, lower interest rates and the possibility of further industry consolidations. But the uncertainties surrounding the proposed Medicare drug benefit causes concern for the analyst.
David Risinger of
, who ties for the No. 2 spot with
Morgan Stanley Dean Witter's
Marie Rossi, thinks a drug benefit under the current administration could be a positive for the sector but says political rhetoric surrounding the drug industry could be a negative for the group. Both he and Rossi are concerned that investors may pull out of this defensive sector should technology start to bounce back later in the year. While the two are confident that these companies will perform well regardless of the economy, if earnings growth begins to accelerate in other sectors, the group may look less attractive on a relative basis.
Our three analysts are unanimous on which stock is at the top of the heap:
. Marsh calls it the gold standard in this industry, and each analyst praises the company for its track record, excellent management and its recent acquisition of
Health Care Distributors and Services