Focusing on medical devices this week, our analysts took a stab at answering the question of what’s going to happen in this space- and in the health care space in general- if the election swings towards a candidate that promises universal health care.

For analyst Matt Dolan, universal healthcare has to be balanced with making sure there is a still a financial incentive for physicians and medical device companies:

Mr. Dolan: As we discuss a possible movement toward universal health care, I think we could see more spending dollars and broader coverage on a numbers basis, but that doesn’t necessarily mean by product, indication or physician, for that matter. Quality of care becomes an issue and innovation can be constrained if spending pressure limits the size of market opportunities. There is an important balance between covering more lives and being politically or socially correct, versus making sure that we can still drive innovation and keep physicians interested in being physicians financially. Similarly, medical device companies need to be able to obtain reimbursement levels that can drive profitable pricing structures for them to take on the risks of developing new technologies. Broader coverage might mean a bigger national medical bill but could drop coverage on a per patient or per procedure basis. I think these are questions that are yet to be answered.

For the complete Medical Devices issue, including interviews with 10 CEOs and a special Off the Record interview with stock picks, click here.

Moving back to our special focus on transporation this week,  Analyst Jason Seidl spoke to us about how the rough times in the economy are taking their toll in the transportation space. He talked to us a little bit about what companies in this space are doing to adjust to these rough times in the market:

Mr. Seidl: You’ve seen many larger truckload carriers pulling trucks out of their fleets. J.B. Hunt (JBHT), Knight (KNX) and Werner (WERN) have all done it. Actually, since the beginning of 2007, Werner has pulled 30% of its medium to long haul or regular fleet out of the marketplace…However, we must remember that the preponderance of truckload carriers out there aren’t big carriers and tend to operate much smaller fleets, the majority of which have fewer than 10 trucks. Thus far we have not seen a large spike in bankruptcies among the smaller carriers. A couple of years ago, freight rate increases were at unprecedented levels for truckload carriers. I believe that carriers took advantage during these times and made hay while the sun was shining. While any proverbial war chests that were built up during this period have helped carriers hang on, I don’t think the little guy can last that much longer.

For the full interview with Mr. Seidl, including an outlook for 2008 and stock picks, click here.

Stepping back from looking at  a particular company in a particular sector, lets take a broader look at the investment climate as a whole. We spoke this week to a few portfolio managers at Schnieders Capital Management, who talked to us about three broad themes that their portfolio is focused on:

1.  Globalization- Schnieders sees tremendous growth potential in this area. Specifically, they are focused on a wide demand for US goods and services- beginning with companies that will help build the infrastructure of developing nations. Caterpillar (CAT) and United Technologies are two of these companies- that are and will be building more roads, power plants, factories etc. in the developing world.
2. Energy- Schnieders has had an overweight in energy “from the time we opened our doors”. Of particular interest are companies that are focusing on renewable and green energy, such as General Electric (GE) which invested $20 billion in green technologies last year.
3. The Aging US population- Schnieders focus with regard to this theme is on drug distributors, rather than manufacturers. To this end, they invest in CVS (CVS), Walgreens (WAG) and Medco Health Solutions (MHS).  

For the full interview with Schnieders Capital Management, including a complete overview of their investment strategy and an outlook for 2008, click here.

Our other special focus this week is on Internet Infrastructure. We spoke to Mark Kelleher of Canaccord Adams Inc., who told us one of his pick in this space: Internap (INAP).

Mr. Kelleher: Internap is an Internet service provider, and they provide internet connectivity.Internap takes this back to the content delivery side. Internap purchased a company called VitalStream and VitalStream gave them their content delivery network assets. That’s just beginning to start to ramp for them. They are also a colocation provider. There is a pretty big demand right now for colocation, for putting your equipment in someone else’s facilities for one reason or another. Customers will colocate within Internap to get closer to Internap’s connectivity; they will connect you to the Internet. Internap has points of presence all over the country and they can hook you into the Internet pretty nicely. They have a pretty good routing algorithm, an ability to see which carrier is delivering data and move your data quickly through the Internet. That is where they sit in the world.

For the complete interview with Mr. Kelleher, including an overview of the Internet Infrastructure space and a look at what’s ahead, click here.
 

In 2007, Transportation was hit hard by predictions made in the first half of year becoming patently untrue in the second. However, there were some bright spots in Transportation in 2007. Analyst John Larkin takes us through the high and low of Transportation in 2007:

The High:

Railroads- Despite soft volume, outstanding pricing and improved fuel surcharge recovery helped railroads maintain and sometimes even expand margins in 2007.

The Low:

Sluggish Freight Demand- Despite much anticipated reports from the first half of the year that freight demand would be way up in the second half, this was not the case. There was no sign of a seasonal peak, and no sign of a demand rebound. 

For the full Transportation issue, including an outlook for what’s to come in 2008, and stock picks, click here. 

Portfolio Management firm Anderson Griggs practices something they like to call “common sense investing.” While they do use the latest mathmatical investment models in determining their investment picks, they also “know people.”  Kendall Anderson, a portfolio manager says about their process:

“Well, let’s use our computer modeling for what it can be used for, but we sure as aheck bette have some judmental override.”

Below are our five picks this week, common sense picks from Anderson Griggs:

1. Colgate-Palmolive (CL)- “I don’t know how many different ways you can build a toothbrush, but Colgate has been able to keep doing this year in and year out, and that’s management-driven because they have taken a product that is very easy to duplicate and they are able to redevelop, to create new markets, to change things enough to consistently grow their assets, consistently grow their sales.”
2. Walgreen (WAG)- Walgreen is a wonderful drug company. It’s not only a consistent grower because they are constantly adding stores, but they are also a beneficiary of change in both the retail and the pharmaceutical industry.
3. Monsanto (MON)- Everyone talks about Monsanto today, so that kind of scares me a little bit, but they really are a special situation. They have the ability to create food at a far larger amount per acre than was capable 20 or 30 years ago. Of course, as our population in the world grows they’re just in the right place at the right time with the right scientist doing the right thing.
4. Stryker Corp (SYK)- Twenty-five years ago how many people had a knee replacement? Today, it’s going to become far more common as time goes by. That’s a special situation that we find interesting.
5. IBM (IBM)- IBM for years was considered a premier growth company, but in the last few years they’ve
   kind of had to redevelop themselves. They are in an area that I think in the next 10 years is going to be far better than the last 10 years and that is not hardware-based but software-based. IBM is truly a leader in that.

For the full interview with Mr. Anderson, including a complete overview of Anderson Griggs common sense philosophy, and an overview for 2008, click here.

Our other special focus this week is on the Invest Northwest Conference 2008. We spoke to David Nexon of the Advanced Mecial Technology Association- who handles medical devices and diagonostics, and will be presenting at the conference. He talked to us a little about where medical devices are headed:

TWST: As you look at the field at this point, what’s important? What’s going on that’s kind of changing the face of things at this juncture?

Mr. Nexon: First of all, there is, as you know, a revolution in our basic understanding of biology and the life sciences and that obviously impacts a highly technological very innovative industry like ours. We’re producing ever more sophisticated products to deal with the many illnesses that affect humanity. In addition, in the broader context of the health system, there are increased pressures for cost containment in the United States, and we’re anticipating a big effort for a sweeping health reform next year. Every country in the world is looking at cost containment issues. So certainly it’s important for our industry to make the point that we’re not a problem in the medical care system, we’re really a part of the solution. It’s our products that fuel the medical progress that so many American patients, current and future, hope for and depend on.

Worldwide, I think some of the trends that are important are the growth of a number of emerging markets, which are really just in the process of formulating their regulatory and reimbursement systems and working with them at the formative stage is terribly important for the long-term future of the industry. I’m thinking particularly of China and India, but there are other emerging markets around the world too. In terms of volume and sales right now, they’re still relatively small, but they’re clearly where the future lies.

For the complete interview with Mr. Nexon, including an overview of how medical devices will change with the change of adminstration,  and stock picks, click here. 

Our special focus this week is on insurance and insurance brokers. We spoke with several analysts in this broad space. One them, Colin Devine of Citigroup Investment Research, talked to us a little bit about his feelings as to where growth opportunites lay in the life insurance space:

Mr. Devine: I think the growth opportunities are going to continue to be centered on the evolution of post-retirement income protection types of products within both domestic and international markets. That can be variable annuities with living benefits, both deferred and immediate. Sun Life (SLF) introduced a great feature last year on their contract, which allows the annuity to store up their income draws if they don’t use them. We believe it provides the income flexibility people will need in retirement and expect all of the leading competitors will be forced to copy it.

For the complete interview with Mr. Devine, including an assement of where risks lie in this space and stock picks, click here.

While generally nothing is certain in the world of investing, today’s market is particularly volatile. In our special focus this week on semiconductor equipment, analyst Ben Pang talks to us a little bit about how to recognize a winner in the semiconductor equipment spaces.

TWST: How do you identify the companies that are going to be the winners?

Mr. Pang: The best way really is to look at who is winning at the leading chip companies. You really have four or five leaders in the chip industry — Intel (INTC) for logic CPU, Taiwan Semiconductor Manufacturing Company (TSM) for foundries, Samsung for NAND flash and DRAM, and Toshiba for NAND flash. These four companies are probably still above one generation ahead of the rest of the world. The equipment companies that are able to gain share at these technology leaders would be the best predictor for what will happen to overall market share.

For the full interview with Mr. Pang, including a look at what 2008 holds for semiconductor equipment and stock picks, click here.

During this tumultous time in the market, knowing when to sell is of prime importance. We talked to several portfolio managers this week about how they determine when is right time to sell in their portfolios:

• Gary Chapman, Guardian Capital: “The main reason [to sell] would be if the driving forces of growth that we bought it for are no longer there. They may have played themselves out, they may have petered out, we may have simply been wrong. If the drivers of growth are no longer there, we’ll sell a name. Another reason to sell a name is simply the valuation getting out of line relative to the growth factors.Also, when running a relatively concentrated portfolio, what we like to do when we look at a new name is to look down on our list and see what we have less confidence in; so it’s an add a name, sell a name kind of idea. Those are the main reasons for selling. Clearly, balance sheet, since quality is an issue for us — if the balance sheet deteriorates, that’s a reason to trim a name and perhaps sell the entire name. If there’s a management change or the management integrity isn’t what we thought it was, that would be a reason to sell a name. Those would be the main factors.”
•  Mark Petrie, Hokanson Associates:  “A number of things can trigger a sale. A stock hitting the price target is certainly one of them. Stryker is a recent example of a stock hitting our price target. Sometimes, we’ll just trim a holding when it hits our price target, especially when it’s a company of as high quality as Stryker. Other times we’ll sell the position outright, but only after considering the tax consequences for our clients. An investment thesis that is no longer intact is another reason to sell a stock. An additional reason might be that a top-down decision to shift from one sector or asset class to another sometimes necessitates a sale as we seek to lower the weight in one area and increase the exposure to another.”
• Christopher White, Fiduciary Trust Company: “We do look closely at valuation. In that regard, if the prices advance beyond our price targets, then yes, we will advise our officers to start trimming or scaling back on positions. We also have targets in terms of portfolio weights since we do not want to see a position grow too large if it has been successful. We also look very actively at the investment thesis for our holdings to make sure that, in fact, it is still valid and we look carefully at the quality of management. If we see deterioration or loss of confidence in management, then that will also trigger a sell.”

For the full investing strategies report, including interviews with each of these portfolio managers, and overview of current conditions for investing and stock picks, click here.