Healthy Choices from Stack

10/09/2002 12:00 am EST


James Stack

President, Stack Financial Management

Given his cautious stance on the market, Jim Stack, editor of InvesTech Market Analyst, has kept his model portfolio highly defensive, holding a 71% position in cash or short-term Treasuries. But in preparation for the next market upmove, the advisor maintains a list of "stocks under consideration" made up of those issues he believes offer "the best trade-off between risk and potential returns relative to the current uncertain economy." He currently favors issues with low valuations, some dividend yield, and a low debt level. Here are his top picks in the healthcare sector.

"C.R. Bard (BCR NYSE) produces medical supplies for cardiovascular urology, oncology, and surgical use. Its p/e ratio is 19, which is close to the ten-year median of 18. Its 12-month revenue growth is +7% and its 12-month earnings growth is +17%. The stock also offers a 1.6% yield with 15 consecutive annual increases. Debt is only 16% of capital and is being reduced. The company maintains an 'A' financial strength rating. Consistent revenue growth combined with cost-cutting measures and reasonable valuation make Bard attractive.

Cardinal Health (CAH NYSE) is a leading provider of pharmaceutical and medical/surgical products and services. Its p/e ratio is 25, which is less than its ten-year median of 26. Its 12-month revenue growth is +15% and its 12-month earnings growth is +28%. Debt is 29% of capital and the company maintains a B++ financial strength rating. In addition to growth from acquisitions, the company has signed 44 new corporate agreements over the last 12 months worth $635 million in sales."

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