Biotech a Buy, Be Wary of HMOs: Investor
Rock bottom interest rates will likely boost key biotechnology stocks, a fund manager told CNBC on Wednesday. But complex new health care implementation may cast a pall on the shares of health management organizations.
"As a group, biotech is probably the place to be this year because low interest rates are supportive of at least some of the macro stuff," said Les Funtleyder, president of the investment advisory arm of Poliwogg, an asset manager. "Low interest rates are supportive of capital consuming sectors like biotech."
He cited biotech firms Gilead Sciences and Celgene as "interesting names," and said traditional drug companies like Merck and Pfizer could be potential buys.
Funtleyder said that dividend payments and pharmaceutical pipelines from Big Pharma "are actually starting to come around now" that they've started overcoming a massive wave of patent expirations called the "patent cliff."
(Read more: Patent 'Cliff' a Challenge, but Manageable: Lilly CEO.)
As U.S. companies prepare for the coming of Obamacare health care legislation, the fund manager warned that HMOs may not benefit immediately.
"The first half of the year we've got to worry about price trends that seem to be ticking up and implementation of Obamacare," Funtleyder said. "The second half of the year, as things start to become clearer…it will be time to buy."
The fund manager raised the prospect of some health care companies either going public,or drawing funding from small investors in order to boost research and development. "Somebody has to pay for things like community clinics," Funtleyder said.
"Somebody has to pick up the slack, otherwise it won't happen," he added. "Why not let the community do it rather than the government?"
—By CNBC's Javier E. David
Additional News: Obamacare Tax Hikes May Just Be Getting Started
Additional Views: Obamacare Could Double Health Care Premiums: Aetna CEO
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Disclosures:
No disclosure or stock ownership information was available for Mr. Funtleyder.
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