Portfolio Manager Perspectives

Jeff Benjamin

Tyler Dann: Why health care sector is rife with opportunity

Nov 8, 2009 @ 12:01 am

By Jeff Benjamin

With Congress advancing its controversial 1,900-page health care reform legislation, Wall Street has pushed health care sector stocks into value territory, according to Tyler Dann, co-manager of the $4.8 billion Aim Charter Fund (CHTRX). “We find opportunities in periods of controversy, and health care is the biggest area of controversy right now,” he said. Health care stocks represent the largest overweighting in Mr. Dann's fund at 17%, compared with a weighting of 13% in the benchmark Russell 1000 Index. He argues that there is a strategic opportunity to seize on “growth/ value anomalies.” “There will continue to be opportunities in the health care sector as we come through the ashes and slouch toward a single-payer [health insurance] system,” Mr. Dann said. He said that the market has oversold the sector out of fear that a public-insurance option will be passed by Congress.

“In my opinion, single-payer is the worst-case scenario for managed-care companies, but I don't think we'll reach that point for a long time, if ever, and our investment horizon is two or three years,” Mr. Dann said.

He summed up Wall Street's knee-jerk reaction to Congress' health care reform efforts as: “Legislation bad, sell stocks.”

The flip side of the fears over a single-payer system is the idea that as more people are insured, the number of medical procedures performed should increase. This should create a volume opportunity for the health care industry, Mr. Dann said.


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