Fairholme Fund manager Bruce Berkowitz says that investor fears over what the Obama administration’s policies could do to pharmaceutical and healthcare companies drove down their share prices, making them even more attractive investments.
Berkowitz, whose fund holds several drug and healthcare companies, told Forbes he became interested in the sector not because of the unbelievable money that the companies are making, but “because of the fear that the new administration was going to destroy our drug companies, destroy our healthcare companies, which sent the prices of these securities over the cliff.”
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“The (share) price you paid versus the earnings that the companies were making were quite reasonable and one could get a double-digit yield,” Berkowitz says.
Only a decade ago, “investors were paying 40 times earnings for our drug companies,” Berkowitz notes. “And today, they're in the high- to mid-single digits with rock-solid balance sheets and you really can't ask for much more.”
If this seems like going against the grain, it is. One of Berkowitz’a mantras is “ignore the crowd," which is why his fund focuses on a comparative handful of securities.
According to The Street’s Jim Cramer, the healthcare sector is most weighed down by President Obama’s agenda — but as Obama’s popularity wanes, the sector will rise.
“We've been positive about this group since it became clear that the agenda's stumbling, now it's time to go pedal to the metal on this beaten down sector,” Cramer said on CNBC.
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