Information technology and health care are two sectors where investors can find value, Peter Garnry, equity strategist at Saxo Bank told CNBC.
“We are looking for companies that have a high return on investment capital and a positive spread to average cost of capital. The companies that are doing that best right now are in those two sectors,” Garnry explained.
This November, the U.S. will go to the polls and if incumbent President Barack Obama wins, his health-care reform program will continue, with drug companies expected to contribute billions toward its cost.
But Peter Garnry says any risks of sharp price declines for health-care stocks are overblown.
“You’ve got to remember it is a very large sector with a very large lobby group in Washington. It’s a very good defensive sector and the market has discounted so much negative news going forward, that we feel it’s a clear ‘buy,’ ” he said.
AstraZeneca, Bristol-Myers Squibb, Gilead Sciences, Humana are all stocks in the health-care sphere that Saxo Bank favors. In particular, Gilead Sciences is seen as a stock due for a rebound, as current concerns over patients relapsing on its hepatitis C drug shouldn’t last, Garnry said.
“We recommend investors to see how the dust settles and then gain exposure on lower prices. We think Gilead is a fantastic company that has great future ahead of it. We think this pretty much the same opportunity as the one we saw in Mead Johnson when they were accused for having their baby formula killing babies in the U.S.,” he said.
In technology, recent reports by The New York Times and The Wall Street Journal have called in to question the ability of Apple’s stock to march any higher.
But Peter Garnry believes the fundamentals remain for the tech giant to further reward investors.
Others within the IT sector favored by Saxo Bank include Microsoft, Dell and HTC.
Additional News: Gilead Sciences Profit Rises on HIV Drug Sales
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Disclosure: Neither Peter Garnry nor Saxo Bank own any of the stocks mentioned.