James Kieffer at Artisan Funds Likes Healthcare Stocks: Stryker Corporation, Johnson & Johnson, Pfizer Inc., Cardinal Health, Inc.

(GuruFocus, December 6 2009) This week, Steve Forbes interviewed James Kieffer, manager of the Artisan Mid-Cap Value Fund.


Here is a brief bio on James Kieffer from Artisan Funds’ website:

James C. Kieffer, CFA is a Managing Director of Artisan and portfolio co-manager for Artisan's domestic value Funds and separate account portfolios. Prior to joining Artisan, Mr. Kieffer was a research analyst at the investment firm McColl Partners. Mr. Kieffer began his investment career at Wachovia Corporation working with Scott Satterwhite from 1989 to 1996, initially as a personal trust portfolio manager and later as a general equities and small-cap value research analyst in the institutional portfolio group.

Also according to the company’s website, The Artis Mid-Cap Value Fund returned 0.21, 1.04, 7.00, and 9.94% during the past 1, 3, 5, and since inception on March 28, 2001, beating the indices during the respective periods.


Here is a brief excerpt of the interview video:





Here is the transcript related to health care:

Do you have any health care exposure now, and how do you handle that area?


We've had some increasing health care exposure in the portfolio. It's still somewhat limited, what we own. We've got some medical products companies, some of the managed care companies as well. And yeah, you need to be careful with it, but then again, everybody knows it's an area of controversy, so those stocks start getting priced for a high degree of uncertainty. And that's one of our jobs, to step in and see how much uncertainty is priced into these names. Stryker, a medical products company that we own, historically was almost a cult stock. It was at 20, 30 times earnings. Sold off to the low-teens multiples and we said no debt in this company, 20% return on equity. Bad things can happen to this company and we'd still have a great starting point on price.


I think an additional element that we've brought to the table thinking about health care is almost surely [that] it's not going to be worse than what it had been. It's not like we don't have somewhat of a road map already with health care in Europe in that you've had socialization of health care in Europe, and these companies work in that environment. It's not like they've elected, like they don't want to be in business in Europe because of that. And they earn a decent return on their capital in Europe. And that's an important framework to keep in mind, that if things get worse in the U.S. that it doesn't mean that these turn into bad businesses. They turn from some very great businesses to good businesses, and a lot of people are acting like there's going to be bad businesses.


Don't forget, when you think about what's happened with health care in Europe, for instance, government's your main customer. So what that means is in the U.S., if the U.S. were to go on that framework, you don't need to have this huge sales force where you're paying $500,000 a year. So the profit model can shift as well along those lines. I mean, don't get me wrong, I'm not a fan of everything that's going on here. There's a framework to think about it with a little bit more of an open mind for what it can mean for these businesses. And still most importantly, we ask how much pessimism is already baked into those names.

(Read the full interview on Forbes.com.)


James Kieffer mentioned four health care stocks, here is a brief survey:


1. Stryker Corporation (SYK, Financial)


Stryker Corporation (Stryker) is a medical technology company with a range of products in orthopaedics and a presence in other medical specialties.


Stryker Corp. has a market cap of $20.6 billion; its shares were traded at around $51.81 with a P/E ratio of 18.1 and P/S ratio of 3. The dividend yield of Stryker Corp. stocks is 0.2%. Stryker Corp. had an annual average earning growth of 23.4% over the past 10 years. GuruFocus rated Stryker Corp. the business predictability rank of 4-star.


2. Johnson & Johnson (JNJ, Financial)


Johnson & Johnson is engaged in the research and development, manufacture and sale of a range of products in the healthcare field.


Johnson & Johnson has a market cap of $177.36 billion; its shares were traded at around $64.36 with a P/E ratio of 14.1 and P/S ratio of 2.7. The dividend yield of Johnson & Johnson stocks is 3.1%. Johnson & Johnson had an annual average earning growth of 12.5% over the past 10 years. GuruFocus rated Johnson & Johnson the business predictability rank of 5-star.


3. Pfizer Inc. (PFE, Financial)


Pfizer Inc. (PFE) is a research-based, global pharmaceutical company. The Company discovers, develops, manufactures and markets prescription medicines for humans and animals.


Pfizer Inc has a market cap of $124.79 billion; its shares were traded at around $18.49 with a P/E ratio of 8.4 and P/S ratio of 2.6. The dividend yield of Pfizer Inc stocks is 3.4%. Pfizer Inc had an annual average earning growth of 11% over the past 10 years.


4. Cardinal Health, Inc. (CAH, Financial)


Cardinal Health, Inc. (CAH) is a provider of products and services to healthcare industry. During the fiscal year ended June 30, 2009 (fiscal 2009), the Company had three segments: Healthcare Supply Chain Services, Clinical and Medical Products and All Other.


Cardinal Health Inc. has a market cap of $11.59 billion; its shares were traded at around $32.14 with a P/E ratio of 9.8 and P/S ratio of 0.1. The dividend yield of Cardinal Health Inc. stocks is 2.2%. Cardinal Health Inc. had an annual average earning growth of 10.7% over the past 10 years. GuruFocus rated Cardinal Health Inc. the business predictability rank of 3-star.