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Pent-up demand and its potential for U.S.

Speaker:
Chris Buchbinder
Title:
Portfolio manager/investment analyst
Based in:
San Francisco office
Investment experience:
16

CHRIS BUCHBINDER: While I do think we’re going to have a recovery in housing and autos over time, and there are attractive opportunities there, I don’t think it’ll be a straight line. I think there will be periods when it won’t look like that’s going to happen — when it looks like it won’t happen.

And so I think it’s prudent as a portfolio counselor to find some less-cyclical opportunities as well, and one of the areas that I’ve really gravitated toward over the last year, year and a half, is health care. Health care had gotten pretty beaten up in the wake of the passing of what some people call “Obamacare,” and I think there’s a perception that there’s going to be pricing pressure on health care — that there’s structural change, and it’s going to be negative.

I guess I come back to the view that there clearly needs to be change in the U.S. health care industry — there’s no question — but the reason that it needs to be changed is [that] the demographics of our country suggest that spending as a share of GDP will become unsustainably high over the next 20 years. So what we’re trying to do is constrain the rate of growth of that industry, but that’s very different from shrinking the industry.

What we know for demographic reasons — and because older people consume more health care — is [that] we’re going to consume a lot more health care in the future. And I think there are companies that used to trade at very high multiples, that have high returns, that have attractive technology positions that are now trading at very reasonable multiples — discounts to the market — based on the fear over the imminent or impending restructuring of the health care system.

And while I think there will be some winners and losers here, it seems pretty clear to me that if health care spending as a percent of GDP is going to increase a lot over the next 10 or 20 years, there are probably going to be some winners in there. So that’s, I think, a pretty fertile ground to shop in as well. And it happens to also help that it’s not particularly cyclical.

So as I wait for the recoveries in some of the areas where I’ve got cyclical investments, health care is a big part of my portfolio that carries me through with less volatility.


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