The healthcare sector is undervalued, despite the bureaucratic uncertainties and cost control efforts posed by Obamacare, and has the potential to grow faster than the overall economy, according to Eddie Yoon, manager of the Fidelity Select Health Care Fund.

”Relative to its history, healthcare stocks are undervalued on an absolute and relative basis,” Yoon told U.S. News & World Report. “Given the long-term track record of the sector exceeding market returns at lower relative risk, this should be an excellent time for healthcare equities.”

The effects of the Affordable Care Act may be adverse for some insurers, hospitals and nursing homes, Yoon noted, but that there are plenty of profitable opportunities elsewhere in the sector.

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Obamacare “will put increasing pressure on companies to innovate in ways that address the upward pressure on growth and cost,” Yoon said. “This should put a premium valuation on companies that are truly driving deflationary forces into the market. “

Yoon looks favorably on companies that offer cost-efficiency solutions, such as mail-order prescription houses and cost-management data firms.

“Hospitals often don’t even know what they are paying for,” Yoon told U.S. News. “There is a huge amount of work to be done on IT systems creating more transparency for them.”

Healthcare companies are also being helped by the growing ranks of baby boomers who are entering retirement age and by more demand from global emerging markets, Yoon explained.

His fund also invests in biotech and healthcare equipment companies that demonstrate successful growth.

The Fidelity Select Health Care Fund has a three-year annualized return of 16.89 percent, which is ahead of both its benchmark and the Standard & Poor’s 500. It’s five-year annualized return of 9.8 percent handily beats the S&P 500’s gain of 3.94 percent for the same period.

The healthcare sector has actually served in recent years as the “main economic locomotive pulling the economy along,” Uwe Reinhardt, an economics professor at Princeton, wrote in an article for The New York Times. In fact, it has created more jobs on a net basis than any other sector during the last 20 years.

In 2010, the percentage of the nation’s year-to-year gross domestic product growth accounted for by healthcare was 16 percent, Reinhardt noted.

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