Healthcare stocks
Interview: Trevor Stewart---Miller, Elizabeth---Fund Manager
>> the gauge of u.s. manufacturing showed an unexpected acceleration of growth last month. the institute for supply management’s factory index rising to 62.8. the survey found that increased demand spurred manufacturers to hire more people than at any time in the past 31 years. that’s the 13th straight month of business growth for the manufacturers. and the commerce department says construction spending rose for a third month in april, also worth noting is not only the increase that came in four times the median forecast of economists surveyed by bloomberg, but look at the revision, up to 2.4, a full percentage point increase from the initial report. our next guest prefers to buy% stocks in areas that are economically sensitive right now. as we get past the real growth phase of the economic cycle, she’s purchasing healthcare stocks, typically not economically-sensitive. elizabeth miller, we’ll call her liz, is a portfolio manager with trevor stewart burton and jacobson.
>> hi there.
>> all this economically-sensitive stuff and you want those that are economically sensitive?
>> absolutely. we take an investment approach that starts with where is the economy and where is it going and as we know from the manufacturer’s report today, we have the up-phase of the economic cycle and good strong growth and we want the areas of the economy most sensitive to that growth.
>> and that brings us to the groups that you like, energy, the best performing group year to date, up 7%, of the s&p major economic groups. you also like industrials and interestingly, how timely, media.
>> right, right.
>> let’s start with media because it’s in the news today with the viacom reshuffle.
>> sure. again, looking at where these industries relate to the economy, media is what we sometimes call a later cycle industry. the economy has to kick in but once businesses are doing better, they let advertising spending go, consumers spend more on entertainment and we haven’t seen the media industry move too much. valuations are reasonable. viacom today, particularly with the overhang from leadership, it’s a good buying opportunity. disney has had its struggles all year. both good companies within the industry and we think there’s a lot of upside there.
>> i think the market would agree with you on the buying opportunity. viacom, whose shares opened down 3%, and that didn’t last long.
>> no.
>> were you buying viacom?
>> we’ve been buying for our clients and have been buying for a while and continue to buy it.
>> let’s talk about other groups. we mentioned energy. you think energy will still go. obviously, it’s one of your favorite groups. is it an oil or economics play at this point?
>> it’s both. it’s been an economics play. we’ve continued to hold on to it. you still obviously have the oil price play in there but we own the natural gas companies, too, which continue to do well as people look for alternatives to oil. and even before we have the oil shock, an improving economy here really starts pushing off balance what we call the supply and demand world balance for energy.
>> what of oil and energy prices kill the economy like video killed the radio star?
>> right. i think we’re starting to see a risk of that and i think what% -you saw at the beginning of today where investors were scared from oil shock is investors will look towards washington to see, what are you going to do to help preserve the economy, to keep it going and to make sure oil doesn’t stall our industries.
>> you’ve started to buy healthcare stocks lately. one is mckesson. what’s the mckesson story in a nutshell.
>> the main part of their story is pharmaceutical distribution. think about the company that gets the drugs to the hospital itself. not to the individual. so they distribute whole sale a lot of medical supplies, a lot of pharmaceuticals. and again, thinking about it from the economic standpoint, when you get the kind of numbers you got today from manufacturing, you start thinking how much longer can this last, how much longer will we be in the real high up-phase of this sirkle and when will we come into the basic, stable, slower growth. when we hit the slower growth part of an economic cycle,industries like healthcare and% consumer staples tend to kick in so we’re starting to look ahead and buy those areas.
>> has the threat of terrorism, because it’s something that more or less people say it’s going to be a fact we’ll have to live with in this modern era, that said, if it’s something you can’t control, you don’t know when and if it’s going to happen, how do you invest around that or do you invest through a risk like that?
>> i think you have to invest through it because you always need to be looking out three to five years, where can the economy go without these outside shocks? but there are things you can watch in the economy that get affected by it. certainly oil pricing, obvious right now. but even the dollar in some ways has reflected what’s gone on around the world and where we’re involved so we can watch things like that and position ourselves for industries that benefit from those moves.
>> all right, thank you very much, appreciate your coming in today. that’s elizabeth miller, that’s what it says on her driver’s license, but she goes by liz and she’s a portfolio manager with trevor stewart. we mentioned oil prices and crude closing above $42 a barrel for the first time today in new york trade. opec meeting in beirut on thursday and bloomberg’s energy reporter is up next.
