Fisher Investments' Healthcare Picks: Large Caps Trumping Small Caps

by: Zvi Bar

Kenneth Fisher, founder, chairman and CEO of Fisher Investments, is a money manager overseeing investments worth approximately $38 billion and with personal assets of over $1.5 billion. Mr. Fisher is considered one of the most influential people in the investment business, and is known for having an aggressive, yet value-oriented mindset. His investments consistently beat the broader market over the long term, and have historically beat the S&P 500 (NYSEARCA:SPY) within 3 out of every 4 calendar years.

Over the past year, Fisher Investments has accumulated positions in numerous healthcare-related companies, involved in businesses such as hospital management, pharmaceutical development and medical device manufacturing. Healthcare related businesses are often considered defensive and cyclical, though several companies can also undergo significant growth with the addition of a new product.

Additionally, many investors believe that health related products are more capable of price-increases in an inflationary environment, as the products are usually closer to necessities than luxuries. Furthermore, several healthcare companies provide appealing dividends and a history of growing that yield. Ken Fisher added two large pharmaceutical companies to the portfolio, and both are foreign:

  • Sanofi-Aventis (NYSE:SNY) is a pharmaceutical company out of France. It is one of the five largest drug manufacturers, based on revenue, and has a market valuation of approximately $100 billion. Sanofi-Aventis also currently pays a dividend of about 3.4%.
  • Novo Nordisk (NYSE:NVO) is a Danish pharmaceutical companies that is best known for its insulin and insulin-delivery devices for treating diabetes. Novo Nordisk has a current market valuation of approximately $70 billion.
Ken Fisher also added five small-cap domestic health-oriented investments:
  • Haemonetics Corp. (NYSE:HAE) is an American supplier of blood and plasma, and related services, with a current market valuation of approximately $1.7 billion.
  • Integra LifeSciences Holdings Corporation (NASDAQ:IART) is an American medical device maker that has received publicity for its development of artificial skin, with a current market valuation of approximately $1.3 billion.
  • Emergent BioSolutions (NYSE:EBS) is an American pharmaceutical company that developed an Anthrax vaccine and which is working on developing vaccines for Hepatitis, with a current market valuation of approximately $803 million.
  • Wright Medical Group (NASDAQ:WMGI) operates hospitals and medical centers within the United States, with a current market valuation of approximately $692 million.
  • Natus Medical (NASDAQ:BABY) is an American producer of baby-monitoring equipment and other devices for newborn sleep disorders, hearing and other issues, with a current market valuation of approximately $393 million.
2011 Performance :
  • SNY: 19.98%
  • NVO: 6.79%
  • HAE: 8.82%
  • IART: 0.44%
  • EBS: -3.54%
  • WMGI: 0.26%
  • BABY:-2.33%
3-Month Performance:
  • SNY: 4.25%
  • NVO: -4.05%
  • HAE: 3.43%
  • IART: 0.15%
  • EBS: -8.31%
  • WMGI: 0.78%
  • BABY:-17.66%

Ken Fisher is well regarded as an above average investor over the long term. His choice to invest in these healthcare oriented companies indicates a seal of approval that most companies would be happy to receive. The volatile market through the last few months may have presented other investors with the opportunity to get into these same names at a price near or better to that which he likely paid.

While none of these investments have worked out extremely well for Ken Fisher or his clients, several have at least held up reasonably well through some of the recent market volatility.

It is worth noting that the best performer of the seven both during the last three months and through 2011 is SNY, and also the largest company within the group. Conversely, the smaller capped companies tended to perform especially poorly over the last quarter, outpacing the broader market as it went down, and the worst recent performance was seen by BABY, the only equity listed worth less than half a billion.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.