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By Pat Dorsey, CFA | 12-07-2009 05:00 AM

Pat Dorsey's Picks: Health Care, Tech, Utilities

Health care is probably the most single attractive area that we see right now, but there are some pretty good opportunities in utilities, too, says Morningstar's director of equity research.

Pat Dorsey: Hi, I am Pat Dorsey, Director of Equity Research at Morningstar. As part of Ideas Week here in December, as you are thinking about investments for 2010, where you should be putting new money in your portfolio, I thought we would run through some of our favorite ideas in the equity universe.

Health care is probably most single attractive area that we see right now. We have been saying this all year and it has underperformed all year. Though we think there is still plenty of upside to go. Really, as the uncertainly lifts with health-care reform we think that reform is not coming through as negative as many people might have expected.

If you remember back earlier this year people were talking about single payer health care, the U.S. transforming to a British style national health-care system. That is obviously not coming to pass, which should mean some of the uncertainty gets lifted, and the really very good economics of a lot of health-care companies remain the same.

In pharmaceuticals, probably our favorite name is Novartis, a large Swiss company. It has a big generic asset, as well as some veterinary and vaccine businesses. About three and a half percent yield, based in Switzerland.

Merck might be one of our favorites among the U.S. pharmaceutical companies. Also a very high yield there, cost-cutting coming in ahead of schedule. We really like a lot of the equipment companies as well. Companies like Thermo Fisher Scientific and Covidien that are providing capital equipment to hospitals and life science researchers.

Very, very cheap businesses that have been hurt again by the uncertainty, hospitals and research facilities being less willing to spend. We think that will change in 2010, as the uncertainty lifts and spending resumes, both businesses trading at pretty good cash returns and low price earnings ratios.

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