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By Jason Stipp | 05-26-2010 12:40 PM

Europe Woes Not Fatal for Health-Care Firms

Despite the European shock waves, fundamentals are intact in health care, and current prices look attractive, says Morningstar's Damien Conover.

Jason Stipp: I'm Jason Stipp for Morningstar. As the markets have experienced some increased volatility over the last few weeks, we've been keeping an eye out for potential opportunities cropping up. One area where we have seen some opportunities is in health care.

Here with me to talk about what he's seeing in health care, and how the issues in Europe might be affecting those valuation, is Damien Conover. He's a senior stock analyst, and the editor of Morningstar's Healthcare Observer newsletter. Thanks for being here, Damien.

Damien Conover: Thanks for having me, Jason.

Stipp: Certainly I think we've seen recently that a lot of things across the board have been hit by these European concerns. To what extent do you think there's some real fundamental issues with the health-care stocks that might have gone down in the last few weeks, related to Europe? Or is just a lot of health care going down with everything else that's been going down amid this volatility?

Conover: It's a great question, and it's an important question. I think what we're seeing is a lot of the fundamentals for these firms being very strong still. So the pressure that's going on in Europe is really causing stock prices to go down where it really is not warranted.

For example, Greece by itself is a very, very small market for most health-care companies, for pharmaceutical firms; it's 1% or less. So it's a very, very small fraction. I think what we're seeing there is potentially fear from investors that what's happening in Greece might spread to other countries.

Stipp: Europe as a market overall, if there is a general fear about slowdowns in Europe, about austerity measures in Europe, and maybe government reimbursements perhaps in some of those countries. To what extent if it really got bad in Europe might this affect some of the pharmaceutical companies, or other health-care companies that have business there?

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