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By Dan Culloton | 02-03-2010 03:01 PM

Dodge & Cox: Health Care Now More Attractive

A lower probability of major reform, attractive growth dynamics, strong franchises, and low valuations strengthen the thesis for these stocks, say Dodge & Cox's Charles Pohl and Diana Strandberg.

Dan Culloton: Hi, I'm Dan Culloton, associate director of fund analysis at Morningstar, and I'm here with Diana Strandberg and Charles Pohl from Dodge & Cox Funds. They work on both the Dodge & Cox International, Dodge & Cox Global, and Dodge & Cox Stock Fund. Diana and Charles, thank you for being here today.

Diana Strandberg: Thank you.

Charles Pohl: Thank you for having us.

Culloton: As bottom-up global investment managers, you guys have a very broad view of equity markets all over the globe. To focus in on health care, because there's been a lot of news obviously regarding the health-care debate and recent elections, how has the election in Massachusetts and the effect that's had on the health-care debate in Washington affected your view of the health-care stocks you own? Are they still more attractive, less attractive?

Pohl: Well, I think it has to have improved the situation. We spent a lot of time over the last year with our health-care team in Washington, meeting the various folks involved, trying to understand the impact that the various different bills would have had on our health-care holdings.

I think it's fair to characterize the impact of both the Senate and House bills would have been negative on our holdings. But in spite of that anticipation of a negative outcome there, we still thought it was a very attractive area for investment, and overweight that area.

The election in Massachusetts has greatly reduced the likelihood that either of those bills will be passed. So that's got to make the whole investment thesis more attractive, and we're evaluating how much more right now.

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