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By Greg Carlson | 05-24-2010 12:41 PM

Why Artisan Mid Cap Trimmed Health Care

Artisan Mid Cap manager Andy Stephens explains why the fund's weighting in health care has gone down recently.

Greg Carlson: One other area I wanted to touch on is a health care. This is Artisan Mid Cap Fund in particular I think has been a fund that's concentrated more on growth companies that have more stable revenue streams. Health care was a source of those companies in the past, and yet more recently the fund's weighting has gone down. Can you talk a little bit about what that's reflecting?

Andrew Stephens: A lot of it is reflecting better opportunities in other parts of the economy and other parts of the portfolio. Health care, by its nature, is less cyclical. You get longer-trending profit cycles in health care, and they tend to be less directly affected by the economy. So in the downturn, in the credit crisis, a lot of our health-care companies did their job. They held up. The earning streams were relatively stable, and they actually, in our minds, got a little overvalued.

Opportunistically, we had the opportunity to reduce some of those weightings and move it into things like consumer discretionary and other parts of the portfolio where we thought there was maybe a little better valuation relative to growth in comparison.

Carlson: So this is no top-down call based on the recent health-care reform bill?

Stephens: Not at all. In fact, a lot of what we do in health care is more innovation focused, more technology, so it's what I would call more health tech. That's really been either a great beneficiary, things like Cerner and others where the health bill has singled those out as an area of spending. But the technology side of health care has not really been that affected. It's mainly services and pharmaceuticals that have been affected, and that's not normally something that we do.

Carlson: OK, great. Andy, thank you very much for your time today. We appreciate it.

Stephens: Thanks, Greg.

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