This Fund Is Showing Signs of Life

07/24/2012 8:30 am EST

Focus: FUNDS

Jim Lowell

Senior Partner & Chief Investment Strategist, Adviser Investments

While the economy moves from consciousness to comatose on a weekly or monthly basis, there are sectors where the signs of life are a bit more stable, at least for now, writes Jim Lowell of Fidelity Investor.

There are signs of green shoots in the housing desert. If we zero in on the epicenter of the boom-to-bust, one of the biggest ditches in terms of both unemployment and hiring, we find signs of revival:

June 20 (Bloomberg): While D.J. Hughes hunts for carpenters to join his team at a Phoenix-area house-framing company, competitors are tracking down his workers at building sites and offering them more money. “Everybody is trying to pull crews from everyone,” said Hughes, 43, a project manager for J.L. Baugh Construction in Gold Canyon, Arizona, who admits to a couple attempts at poaching framers from rival contractors.

“I’ve been doing this for a quarter of a century and this is the biggest shortage of skilled laborers I have ever seen.” Glenn Gittus, who started a framing company in May, four years after he sold his previous one, said experienced laborers are hard to find because few locals are entering the trades. “It’s a knife fight out there trying to get crews,”

Gittus, who wants to add about 30 framers to his 20-person team, said he’s being careful not to hire too many
employees because the Phoenix area’s “mini boom” is likely to last only a year or two until investors renting out properties dump them onto the market. His previous firm had about 350 framers.”

So there are signs of green shoots in the housing desert, but it’s still a tough row to hoe.

Having read all the lines that were trying to read between the lines of what the Supreme Court would or wouldn’t do, I sat out the folderol in favor of Justice Ruth Bader Ginsberg’s quirky quip: “Those that know, don’t talk, and those that talk, don’t know.”

Unfortunately, after the Supreme Court’s ruling on June 28, the chattering class became even more vociferous. Fortunately for us, our level-headed investment perspective lets us proceed knowingly and optimistically in this growing demand sector.

Investing in health care, and overweighting it via Eddie Yoon’s Select Healthcare (FSPHX) fund, has been a winning combination for our overall portfolio strategy for several years.

I know that fundamental uncertainties exist, such as patent expirations, the toll generic drugs take on major pharmaceuticals’ earnings, regulatory growth impingements, and more. And while non-specific sector ripple effects haven’t been alleviated by the Court’s decision, I still think that the health-care sector offers both undervalued opportunities for long-term demographic and emerging market growth, and reasonable risk metrics for portfolio defense during periods of market turmoil

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