For Subscribers

Get the complete article now!

Two analysts and top management from eleven sector firms examine the Healthcare sector in this special 51-page issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info438.htm

TWST: In general, how well have the healthcare stocks rewarded investors over the past 12 months?

Ms. Haggar: After a great year 2000, this year has certainly been much more volatile for healthcare stocks. Their performance has been mixed depending on a particular subsector.

TWST: As you analyze the performance of your fund over the past year, which sector contributed most to the overall return?

Ms. Haggar: The sectors that have performed best so far this year have been services, specialty pharmaceuticals, and medical devices.

TWST: Would you describe Stryker and Biomet as high-tech in terms of medical technology?

Ms. Haggar: No. Orthopedics in general is perceived as rather low tech. The orthopedic industry is, in my opinion, a great longer-term play on the demographic trends and on the aging of the baby boomers. These exercise conscious “weekend warriors” may not yet be breaking hips because of osteoporosis, but they are certainly boosting the knee replacement procedures. We are seeing a lot of sports-related injuries among the baby boomers.

TWST: What about the specialty pharmaceuticals, such as Allergan and Shire Pharmaceuticals?

Ms. Haggar: We don’t own Allergan (NYSE:AGN) currently. Allergan was one of the best performing stocks in 2000. We still own Shire Pharmaceuticals (Nasdaq:SHPGY). The stock has been quite volatile in 2001, but it is still up from where we bought it. Unlike many other specialty drug stocks, Shire has not rebounded yet, after a group correction, because of two factors: 1) fears of generic competition to its lead drug Adderall for Attention Deficit/Hyperactivity Disorder (ADHD) and 2) skepticism over the BioChem Pharma acquisition. We believe, however, that these concerns will dissipate shortly as the company receives an FDA approval for Adderall XR and starts converting Adderall sales to the new, more convenient XR version. Moreover, we should start seeing some benefits later this year from the BioChem Pharma acquisition. Specialty pharmas were performing very well as a sector in the first half of this year, despite the fact that during the first quarter there was a significant money outflow from health care into more economy-sensitive sectors. Investors were taking profits in health care, which was one of the best performers in 2000, and shifting into more economy-sensitive areas. Specialty pharmas, however, outperformed health care and the market overall, so they were clearly the stocks to be held in the first half of 2001.

TWST: Which sectors are you overweight in today, and how might allocation change over the next three to six months?

Ms. Haggar: Overall, we still have a relatively high cash position, as a defense against the potential market volatility during the war against terrorism. After a down first quarter, health care had a tremendous recovery in the second quarter this year. For example, our portfolio in the second quarter was up 18%. Anticipating a correction this summer and a lack of catalyst events, we increased our cash position to 30%. This turned out to be fortuitous for the third quarter performance as the market declined in the aftermath of the September 11th terrorist attack.

This special issue includes:

1) Investing in Healthcare Funds - In an in-depth (3,800 words) Analyst Interview, Mariola B. Haggar, President, General Partner and Portfolio Manager at Haggar Concord Partners, LP, examines the outlook for the sector and shares specific stock recommendations.

2) Healthcare Benefits Management/Outsourcing - In an in-depth (3,800 words) Analyst Interview, Michael J. Baker, Health Care Services Analyst focusing on benefits management/outsourcing at Raymond James & Associates, examines the outlook for the sector and shares specific stock recommendations.

3) CEO interviews (average 2,500 words). Top management of eleven sector firms examine the outlook for their firm and the sector.