. Risinger joined
in mid-1999, covering the health care information technology, distribution and outsourcing sectors. From 1996 to 1999 he covered pharmaceutical services at
Morgan Stanley Dean Witter
. He started his research career at
Industry Outlook and Style
Risinger is very positive on the health care distribution market, though he warns that this year isn't likely to be as spectacular as last: "The group had a phenomenal year last year, trading up over 100%, so investors shouldn't expect that type of performance in 2001," he says.
Still, the Merrill Lynch analyst expects earnings growth to average 15% - 20% over the next year or so, and he says investors should look for performance at similar levels. He notes that earnings visibility for most companies in the sector is very good.
With the outlook for the economy less sure, Risinger says that health care distributors are "high-quality companies with fundamentals that will perform well irrespective of the economy." Should the
Fed continue to cut rates and thus accelerate
S&P 500 earnings growth, however, the group will look less attractive on a relative basis, the analyst observes. But, he adds, "it will take time for rate cuts to impact the economy, so we remain constructive on the distributors in the near term."
Another modest risk Risinger cites is political rhetoric surrounding the drug industry. "There could be additional political attacks against the drug industry," he observes, "but we don't think that will cause significant Wall Street concern, because the
administration is in charge." The analyst also believes a Medicare drug benefit under the current administration would be a positive for the sector, as the sales volume of drugs would likely increase.
Risinger sees industry consolidations, like the recent purchase of
, as positives that will help drive performance for the sector. He picks Cardinal as his top large-cap play and
as the best small-cap name. (Merrill Lynch does not have investment banking relationships with either company.)
Favorite stock for next 12 months:
"Cardinal Health is our top pick given the company's track record, diversity of earnings and high earnings visibility. Current target is $105."