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A Special Message From Christopher Ruddy
Health Care:
Investors reacted as expected the day following the November 2006 election when the Republicans were ousted, selling their ill-fated medical holdings. To make matters worse, a tidal wave of bad news hit the sector soon after: options-backdating scandals involving several insurers, including industry leader United Health Group; Pfizer's suspension of trials on torcetrapib, the cholesterol drug that many expected to be the company's new blockbuster, taking an 11% bite out of its stock. Other large drug stocks suffered as well, as the news stoked long-time concerns about the inability to replace older drugs due to go off patent protection. But look closer and you'll find that most of the issues behind the recent
pullback are short-term problems. Meanwhile, long-term health-care spending
is going nowhere but up, up, up. And Financial Intelligence Report thinks that regardless of which political party reigns supreme, owners of the right health-care and pharmaceutical stocks will be the big winners this year and beyond. Safety and SpendingHealth care is a safe haven for investors because it typically holds up well when times get tough because people still need to buy medication even when they're paring back on overall spending. Its relative strength usually rises when the market is weak, and falls when the market is strong. However, it has remained in a strong uptrend along with the S&P 500. Since the market's small correction in June and July, the health care sector has outperformed the S&P 500 by several percent. That demonstrates the defensive nature shown by market professionals as the market continues to rise. The fact that health care has been in a strong uptrend signals that money is moving into more defensive sectors as the risk of a correction increases. That's what happened during the 2000-2001 recession, when drug stocks outperformed the broader market by a wide margin. This year the S&P Healthcare index is expected to post an earnings increase of 11% compared with 5% profit growth for the S&P 500. Aging and Spending TrendsAnd one particular trend we at Financial Intelligence Report have noted, illustrated and underscored time and again is the impending retirement of the massive 77 million-strong Baby Boomer demographic. And as this segment of the population leaves the workforce, their health demands will only increase. The Baby Boomer exodus will undoubtedly increase the need for more drugs, healthcare services and medical innovations. There are still many reasons to expect continued robust returns from some of the better-performing healthcare and biotech companies. These include: 1. A rapidly aging population in many countries, including the United States, Canada, Europe and Japan. This demographic tidal wave will cause demand for healthcare to skyrocket. 2. An increasing number of affluent seniors, many of whom are willing to spend whatever it takes to improve their existence and lengthen their lifespan. 3. Many exciting new technologies, such as cancer-fighting drugs and new medical techniques that slow the aging process. Ten years ago, biotechnology was an unsubstantiated science based largely on theories and ideas. But today, many new developments are rapidly becoming a reality. 4. Increased government spending on healthcare. 5. Today, there are some 600 million people over the age of 60. By 2050, experts expect some 1.6 billion. Of course, there are many reasons why more people are living longer and healthier lives. By the year 2050, the number of seniors is expected to increase by 35% in Europe and by 28% in North America. As the world population gets collectively older, spending on healthcare and biotech will continue to surge. Seniors are also the most powerful single voting block in the United States and Europe, and that fact puts huge pressure on governments to spend more for health care services. This will result in serious profits for those investing broadly in healthcare and biotech sectors. But there is a caveat: Government would socialize medicine, reducing profits and crushing competition. We believe the collectivist model for healthcare will continue in places like Europe and Canada. However, we still see the United States as the last bastion of free enterprise. There will be continued efforts to "manage" care. But on the whole, the creators of new drugs and biotech innovations will reap tremendous rewards. According to research from T. Rowe Price, spending on drugs by people between the ages of 55 and 74 is expected to triple between 2005 and 2015. And people between the ages of 35 and 54 are expected to spend twice as much on medication over the next decade. Moreover, political concerns and such short-term issues as options backdating are now fully priced into health-care stocks, says Legg Mason Value Trust manager Bill Miller. Insurers like Aetna and Health Net, both of which Miller owns, trade for about 13 times next year's estimated earnings, compared with 16 for the S&P 500. Large, diversified healthcare companies like Johnson & Johnson, Abbott Laboratories and Novartis are priced well below their historical average yet are expected to report stronger profit growth than the broader market. Many of these stocks have never traded so cheap. 500%-1,000% Profits Over the Long-TermSelect healthcare and biotechnology stocks have been bringing in spectacular returns for investors over the past five years. Here are a few examples: Aetna (NYSE: AET): Up 775% in five years. FIR readers own three more giants with the same out-of-this-world potential: HEALTH CARE GIANT #1 One is the fifth-largest U.S. based pharmaceutical company based on revenues, currently trades at bargain prices with a yield of 4.27%. FIR readers who picked up this stock when we recommended it in April 2006 are up 11.1%. Plus, it was announced recently that this company and Sanofi-Aventis had signed a pre-merger agreement, potentially creating the worlds largest drug company, surpassing Pfizer. Shares rose 5% on this news alone, hitting a new 52-week high. HEALTH CARE GIANT #2 Another FIR readers own is a biotech leader with shares up over 85% during the past year and over 1,000% over the past five years. In addition to high dividends, these health-care companies are also a long-term hold because it is a sector that will grow regardless of the health of the economy due to the coming baby boom crisis. HEALTH CARE GIANT #3 Healthcare and biotechnology can be confusing sectors to invest in, and you may prefer to keep things simple by putting your money into an index fund or an ETF, which invests in a basket of stocks. This also lowers your risk and simplifies management of your portfolio. Among the more than 20 health-care ETFs currently available, many are broadly based within the health-care market. A great way to thin out the risk yet profit from the expected run-up in large-cap health companies like Pfizer, Johnson & Johnson, Amgen, Merck, Wyeth, UnitedHealth, Medtronic and Bristol-Myers Squibb is to buy an ETF with all of the above in its 10 holdings. The one we have in mind has an average market cap of $10.69 billion to $1.08 billion, and, as you know, large-caps have outperformed small-caps in the last six months. It has a 48% allocation to pharmaceuticals, with much of the rest in insurance companies and medical testing companies. Results from the fourth quarter of 2006 showed that the medical-device and managed-care sub industries reported better-than-expected profits, something that could definitely transfer into healthy profits in 2007. Interestingly, this ETF topped out in late October 2006, bottomed in November and finally broke out in early January 2006 ... and it's been testing highs ever since. This is a very bullish pattern and one we expect to continue for some time, especially if investors again seek the safety of defensive stocks in light of economic and global uncertainty. Find out the names of all three of these Health Care Giants. Click Here Now. Market-Beating Success Year After YearSince launching FIR, we have had a remarkable record of success understanding trends and piggybacking our investment recommendations on them. The FIR portfolio has performed remarkably since its inception in Sept. 2003. Our stock recommendations made in 2004 have increased 58.4%, while those we advised readers to buy in 2005 are up 28%. The S&P 500, on the other hand, turned in 9% and 3.5% gains in 2005. In 2006 our stock selections outpaced the S&P 500 by 120% and closed with a gain of 15.3%. On average, our stock recommendations grew 33.9% while the S&P 500 index averaged 8.5% gain last year. In other words, FIRs advice performed an amazing four times better than the S&P 500 index. Our success has nothing to do with luck or a "crystal ball." We just believe in understanding trends, and riding the right ones at the right time avoiding the imposters along the way and then acting on our intelligence to know when it's time to step aside. But it's not that easy for the average investor to accomplish on his or her own. You need to have a source you can rely on. Unlike most other financial newsletters, with Financial Intelligence Report, there is no hype. There are no absurd claims. Its just thoroughly researched, accurate information, reasonable projections and excellent investment advice from some of the best financial minds in the country. In fact, Financial Intelligence Report is more like a white-paper report that major trust companies send to their billionaire clients. Most investment newsletters providing this type of incisive coverage typically cost $200 to $800 a year. Some cost well over $1,000. So how much does Financial Intelligence Report cost? Typically, FIR costs just $199 for a one-year subscription. But today we have an even better offer for you! No-Risk, Limited-Time OfferFor a limited time only you can sign up for a one-year trial subscription to FIR at the special introductory price of just $99 (12 monthly issues), save more than 50% off the regular price of $199 and get up to 5 special reports absolutely FREE! Your FIR subscription is completely risk-free. If for any reason you don't like the service, just let me know and you'll get the full, unused portion of your subscription returned to you! No questions asked. At just $99 a year, Financial Intelligence Report is a tremendous value. Just a single recommendation from one issue or any of the following valuable special reports could easily earn you 100 times the cost of the subscription
And remember, you may cancel whenever you like with no risk or obligation. Whatever you decide, you can keep the bonus reports as a gift. It's my way of saying "thank you" for giving FIR a try. So what are you waiting for? We look forward to welcoming you aboard. Join now! Thank You, Newsmax.com |
