Morningstar Advisor - April/May 2011 - (Page 32)

Sector Rap Health Care Survived 2010, but Investors Want Proof By Philip Guziec Our analysts say risk overhangs are still affecting stock prices. There’s been a lot of activity over the past few years that has affected the fundamentals of health care. We’ve had a “Great Recession” and health-care reform legislation. The industry’s in an interesting place right now. I sat down with Alex Morozov, Debbie Wang, and Damien Conover of Morningstar’s health-care team to get a better picture of what’s happening in the industry. Philip Guziec: Where are we, operationally, across the health-care space? Alex Morozov: 2010 was definitely an interesting year for health care. In March, we had the legislation passing both chambers of Congress. The reform itself was not as disastrous or as terrible as a lot of investors feared. So health care survived—we didn’t go with the single-payer system; we didn’t have any other provisions that were really detrimental to the way the system operates currently. So, what happened? Why didn’t we see this big pop in health-care valuations? Why didn’t we see stocks move? Well, a recession happened. Surprisingly enough, we always thought that health care was a little more recessionresilient than the other sectors, and that thesis has held up somewhat. Some procedures got deferred. We saw a lot of elective procedures that really took a significant nose dive in the first half of the year. What really changed was how we defined those elective procedures. In the past, elective procedures were maybe just aesthetic surgeries, but now we are seeing some procedures getting deferred that historically have not fallen into this “elective” category. 32 Morningstar Advisor April/May 2011

Table of Contents for the Digital Edition of Morningstar Advisor - April/May 2011

Morningstar Advisor - April/May 2011
Letter From the Editor
The Debate That Matters Most
What Can the Mutual Fund Industry Do Better?
Cool Logic, Warm Intent
How to Start a Mutual Fund
Owner and Operator
Middle East Revolts Roil Oil Markets
Four Picks for the Present
Investment Briefs
How We Improve Our Odds of Picking Outperformers
Health Care Survived 2010, but Investors Want Proof
The Global Fund-Leadership Playoffs: Europe vs. the United States
U.S. Fund Investors Have It Good
U.S. Fund Firms Learn to Speak UCITS
Balancing Act
The Tamer Ride
Investors Lend a Hand
Healthy, Wealthy, and Wide
Foreign Funds That Win at Concentration
Mutual Fund Analyst Picks
50 Most Popular ETFs
Undervalued Stocks With Wide Moats
VAs Finish 2010 With a Solid Gain
Buying Good Funds, Poorly

Morningstar Advisor - April/May 2011