Last Updated Mar 23, 2010 10:39 AM EDT
Tom Forester, manager of the Forester Value Fund, said that the rally reflects the removal of much of the uncertainty that has held down health care stocks for months as the debate proceeded tediously and unpleasantly through Congress. Forester, whose fund gets the top rating, five stars, from Morningstar, said he was anticipating such a reaction, had planned for it and expects to be able to profit from it.
"I've been overweight health care for quite some time," he told MoneyWatch. "I've been surprised at how long this has been dragged out."
Describing his reasoning, Forester said: "Once they pass this thing, it doesn't matter what they pass, [health care] is going to outperform. Letting them have a vote on it and letting people know what's going to be in the doggone thing will help health care stocks. Not knowing was hurting them."
It also hurt the returns of his fund. Forester Value has dramatically lagged the Standard & Poor's 500-stock index for the last year. Over a decade, however, it has spectacularly beaten the benchmark.
The weakness of the health care sector means that "most of these stocks are dirt cheap," he said. Large drug makers especially have been beaten up, and they should be among the biggest beneficiaries because of the perceived role of their products in keeping costs down (better a pill for what ails you than a stretch in the hospital, the thinking apparently goes).
Bristol-Myers Squibb (BMY) is Forester's top pick among the drug manufacturers. Two others that he likes and finds particularly cheap are Pfizer (PFE) and Eli Lilly (LLY). All three were up strongly Monday morning.
Pfizer and Lilly "have some big drugs coming off patent, but they're trading at just abysmal valuations," he observed. "Just getting a break from the acrimony will help these stocks."