A Contrarian Approach to Investing in Health Care: Expert Portfolio Manager Mark W. Oelschlager Interviews with The Wall Street Transcript

Wall Street Transcript

67 WALL STREET, New York - May 17, 2013 - The Wall Street Transcript has just published its Investing in Health Care Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with highly experienced Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Health Care - Electronic Health Record Adoption - Biotechnology and Pharmaceutical Investing - Biotechnology and Pharmaceuticals - Biotechnology and Pharmaceutical Companies Valuation - Platform Interoperability and Data Analytics - HITECH Act Incentives - Affordable Care Act

Companies include: CR Bard Inc. (BCR), Becton, Dickinson and Company (BDX), Biogen Idec Inc. (BIIB) and many more.

In the following excerpt from the Investing in Health Care Report, an experienced portfolio manager discusses his asset allocation philosophy for investors:

TWST: What are some of your top picks or favorite investment ideas? Would you talk a little bit about them and how they meet your investment criteria?

Mr. Oelschlager: One of our big holdings is CR Bard (BCR), which falls into that first group that I talked about. Like I said, procedure growth has been limited in recent years and that's caused investors to avoid the stock, but we're talking about a company that generates returns on equity well into the 20s; consistent free cash flow; it's trading at about a 7% free cash flow yield, whether you take the most recent year's results or the last four years; and it is one of the leaders in its field.

We just think that it's an uncommon value to have such a dominant company with such strong financial metrics trading at such a cheap valuation, so that's one that we feel good about. And a kicker to the story there is that they recently won a lawsuit against Gore for patent infringement, and they are being awarded several hundred million dollars. Gore is appealing, but that's a big chunk of change that should be coming Bard's way, and it really doesn't seem to be reflected in the stock at all.

Another company that is in that same space is Becton Dickinson (BDX). Again, high returns on capital, consistent business, good free cash flow, but being overlooked right now because the story isn't as exciting as it is for the biotechs. This is a company that's grown its dividend for more than 40 years in a row, and we think there's a lot of room for that to continue. So those are two examples of companies that we like right now.

TWST: Earlier you mentioned avoiding biotech. What other areas do you intentionally not have exposure to?

Mr. Oelschlager: We tend to avoid the hospital area, because we just don't think it's a great business. You are competing against nonprofits, that's one problem. Another problem is that you have high fixed costs. And the whole sector has the issue of...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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