James Lowell is a partner and chief investment officer of Adviser Investments, a fee-only private money management firm with over $2.5 billion in assets. He is a guest investment columnist for Forbes Magazine, and the editor of the multiple award-winning independent newsletter, Fidelity Investor. Mr. Lowell is also the editor of the weekly electronic sector trading service, Fidelity Sector Investor, and is the founding editor of The ETF Trader on Marketwatch from Dow Jones. He is also a featured monthly investment strategist columnist on Marketwatch, and the Editor-in-Chief of The Forbes ETF Advisor by Jim Lowell, an independent investment advisory newsletter exclusively focused on exchange traded funds.
Despite the uncertainty over the future for Obama's health-care plan, fund expert Jim Lowell favors this sector, and has several preferred ways to invest.
Jim, an unusual time right now for health-care funds.
There's a lot of pressure on the health-care sector, basically political pressure and the fears attendant to it. There is this overriding sense that somehow Obamacare will be bad news for the health-care industry.
I find it hard to believe that forcing 30 to 40 million new consumers into an industry would be bad news for it, even if the prospects for it being passed as we currently know it were greater than I think they are. The reality is that it is likely to be an intransigent subject for not just months but many, many years to come.
Are there certain funds or ETFs that we should gravitate toward?
Absolutely, I will tell you the funds, and I will also tell you the reasons why. One of the funds is Fidelity Health Care (FSPHX), run by Eddie Yoon. A great diversified fund, owns Biotech, major pharmaceuticals, medical equipment and systems, HMOs, all in that bundle.
The reason why I like health care so much is that it has a lower beta, lower risk on the S&P 500, with a consistent long-term track record of being able to outperform that marketplace. The reasons are really twofold:
So there is both a near-term good defense and a long-term offense in the sector that has me over weight health care.
Isn’t there a degree of uncertainty right now, though, in health care?
There always is a degree of uncertainty in any sector. Probably right now, the preponderance of uncertainty facing health care would come from the political side of the aisle.
But there is also that issue of major patent expirations among the major pharmaceuticals. They are even currently counter-balancing that threat to their bottom lines by going on an acquisition binge, especially among the small- and mid-cap biotech stocks.
Do you expect any movement this year though, in light of this being an election year, on health care in the first place?
On health-care policy? Probably not. On health-care stocks, absolutely.
They are a great core defensive play, so you are seeing steady flows into health-care funds relative to steady outflows from virtually every other type of equity fund. It has a good dividend yield story to tell, but really it is their necessary story...you just simply can’t give up on health care, no matter how bad or good things get.
Is that often the case during an election year, or just this time?
No, this time it is clearly driven by a political agenda, and also the opposition to that agenda in trying to make mincemeat of either side. But that is just politics. The fundamentals inside health care have rarely been better for the longer term. It’s a space I think I will be committed to for a decade to come.