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Sector Fundamentals - Healthcare and Financials continue to surprise!

In 2010, sectors with greatest exposure to global market will show better EPS growth, both Energy and IT looks favorable here. Additional, catalysts for Energy is the recent improvement in oil prices and for IT, continued weakness in dollar. Health care is another sector we like, which is expected to gain from health reforms, emerging market growth, renewed interest in vaccines due to Swine Flu.

Healthcare also looks great from a technical perspective. Key industries like Pharmaceuticals, Biotechnology and Managed Care are expected to perform well. You can also expect some M&A activities in bio tech sectors. Whether Obama's healthcare reform plans passes or not, we believe this sector has strong catalysts that will move it higher.The Health Care sector is forecast to post 15% EPS growth in 2010. Its P/E-to-projected-five-year EPS growth rate (NYSE:PEG) ratio of 1.4X is in line with the market's PEG ratio of 1.4X.

Higher fuel cost may hit the industrial sector, but at the same time, a 46% earning from international market and improving global outlook for 2010 will be a EPS booster for this sector.

Financials ranks highest in EPS growth and a Low valuation. Some of the latest Fed statements have helped boost financial stock in 2010, we expect financial to continue to be stronger this year. Utility stocks have low valuation and have seen some decent EPS growth. Although, they are not the best performers in today's market, you should certainly have utility stocks in your diversified portfilio due to its low risk.
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