NEW YORK ( TheStreet) -- The health care sector saw a big reversal of fortune in 2009.

Health care stocks started last year on investors' "do not touch" list due to the health care reform effort. However, by the end of the year, with the health care reform effort nearing resolution, health stocks in managed care, hospitals, information technology and medical device sub-sectors had experienced a major rally.

With large-cap stocks expected to produce bigger results in 2010, some big name health care names are also looking to extend rallies.

Cigna ( CI) is a good example. The managed care company went on a huge run once the size and scope of health care reform became more visible. Cigna, due to its diversified business and relatively small exposure to Medicare Advantage, received a big boost from investors during the second half of 2009. Cigna shares have been on a steady upswing since March.

WellPoint ( WLP) also received a clean bill of health from investors after being shunned during the early days of the health care reform effort. WellPoint shares also moved up steadily from a 52-week low last March.

So is the rally for the 2009 second-half rally stocks in healthcare going to continue, or do the health care shares already have priced into them all they can expect from the end of the health care reform overhang?

For many managed-care bulls, Cigna and WellPoint continue to be the overweight calls. However, some analysts also like UnitedHealth Group ( UNH). United was a managed-care dog in 2009. Even though it has a higher degree of Medicare Advantage exposure than other health care shares, its lack of attention in 2009 could turn it into an opportunistic play in 2010, according to some analysts.

In pharmaceuticals, Pfizer ( PFE) has 800-pound-gorilla-in-the-lab drug Lipitor going off patent this year, and Lipitor represents a huge chunk of Pfizer earnings. Both Pfizer and Merck ( MRK) are in the midst of M&A integration -- Wyeth in the case of Pfizer and Schering-Plough in the case of Merck.

The Merck deal received higher marks from the market, but both Merck and Pfizer are trading at historically low multiples versus the market.

Pfizer and Merck can offer investors stable earnings and continued cost-cutting from the corporate integrations. However, can the large-cap pharmaceutical stocks outperform in 2010 on the strength of a large-cap rally, or will the market continue to favor more growth-oriented, higher-risk biotechnology names?

The biggest run in healthcare in 2009 was Tenet Healthcare ( THC). Dallas-based Tenet was the 2009 performance leader among all stocks in the S&P 500 Index. Of course, hospital stocks were so beaten down in 2008 that their huge gains in 2009 -- in comparison to many other stocks, both in health care and the broad market -- were not a surprise. Hospital stocks are also very sensitive to the larger economic conditions.

Will a continued recovery in the U.S. economy make Tenet another outperformer in 2010? Or will health care market darling Cerner ( CERN) continue to lead the way in health care sector returns?

The medical information-technology sector was the least affected by health care reform. The move to electronic records was never in doubt, just the pace and size of the adoption by hospitals and physician groups. Cerner benefited the most from the electronic-records initiative, as its large hospital group is expected to be among the leaders in moving to electronic records. Still, some analysts think that at $82, Cerner may not have much room to grow in 2010. Analysts also add that a big portion of the demand from hospitals to make the move to electronic records may not occur until 2011, delaying sale of Cerner software for at least a year.

In the medical technology healthcare sub-sector, all eyes are on Boston Scientific ( BSX). Boston Scientific has a new CEO who has engineered previous health care turnaround stories. Shares of Boston Scientific have trailed peers, especially Medtronic ( MDT), whose last earnings included a sales level that drove investors into Medtronic shares.

The medical technology sector should receive more attention in 2010 due to continued U.S. Dollar weakness. Baxter International, for example, with 60% of its sales overseas could continue to be a currency-related health care winner in 2010.

Boston Scientific, on the other hand, like UnitedHealth Group, is a comeback play. Which raises the question: Will the comeback players produce in 2010, or will 2009 health care rally stocks like Cigna, WellPoint and Tenet continue to be the large-cap leaders among the healthcare sector? Vote in our poll to learn the consensus of TheStreet.

Which large-cap health care stock do you think will be the best market bet in 2010?

Tenet Healthcare
Boston Scientific

-- Reported by Eric Rosenbaum in New York.


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