ETF Expert

Big pharma may be a healthy place to visit in 2009. Drug makers like Pfizer have gobs of cash, a battered share price, and a wide array of potential blockbusters coming to market… not to mention a yield of nearly 8%.

Diversified health companies may be even more enticing. Abbott Labs, for example, has revenue from the pharma sector. Yet equally important, they're a leader in the rapidly expanding medicated stent world. Meanwhile, JNJ (Johnson & Johnson) is currently at one of its lowest "valuation" prices ever, and few doubt its viability as a triple-A rated stock for more than 60 years.

What's more, if you read up on biotech, one of 2008 few brighter spots, you'll see Giliead leading the way on HIV/AIDS and Genetech creating small miracles in cancer treatment. When the broad market is down 40% or more, biotech has managed to hold in with less than 14% losses this year.

It's no secret that healthcare providers in the Dow Jones Healthcare Provider Index Fund(IHF) have struggled all year long, down 45% YTD. And many surmise the under-performance may have been due to fears of government intervention that would sap profitability.

Yet are those fears overblown? Even if government-funded healthcare programs translated into higher taxes, does this mean the Wellpoints and United Healthcares of the world would make poor investments?

Here's my take: When Obama takes office, he will need to tackle the budget deficit, the financial crisis and the economy first. Energy independence and wars abroad also require attentiveness. And that may put wholescale health-care reform on the back burner.

But not entirely. Any effort to increase the number of insured individuals would increase the number of managed care enrollees. That could help companies like Wellpoint(WLP) and United Healthcare (UNH).

Nevertheless, I still have trouble seeing the narrow Healthcare Providers Index Fund (IHF). There are too many uncertainties. After all, gambling on the smaller sub-segment doesn't seem sensible when a broader health care ETF in Vanguard Healthcare (VHT) would certainly do.

Disclosure Statement: ETF Expert is a web log ("blog") that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Advisor with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.