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Value Investing: Two Sectors You Must Know

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And where those two sectors intersect are the best values of all.

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Gregg Early: Right, so they have the recurring revenue and they sign the contracts. They just had a C-level cowboy up there running the stock for a little while.

Brian Frank: Yes, definitely, there was some turmoil in the management. They have had proxy fights with this guy a few times, and there has been a little bit of turnover in the sales force. Like I said, it didn't grow as fast as everyone thought it should.

There is going to be a little bit of a delay between what is called phase 1 and phase 2 of the implementation of the electronic health records. It is actually from the stimulus bill, not from the health-care bill. People don' t know exactly when it is going to occur, and one of the things that Wall Street hates the most is uncertainty.

However, it is just the uncertainty of the timing. If you are a long-term investor, like we are, you can hang on to this and wait out whatever it is going to be, the 12 or 18 months, before phase 2 kicks in and the growth comes back.

Gregg Early: Are you seeing any transitions now that look more deeply at the slight economic recovery? Are you seeing any transports or any logistics companies that seem to be gaining a foothold here?

Brian Frank: I have looked into them, I have an eye on FedEx (NYSE:FDX), especially after it disappointed in earnings, but the stock price didn't reflect that disappointment at all. They are still quite expensive here.

They are, of course, very solid companies, and although the US looks like it is picking up, the global economy looks like it is under a lot of pressure right now.

I actually want to remain what I call counter-cyclical, or acyclical. A lot of the other ideas we have, QSI in particular, is related more to health-care spending or IT spending. We own Humana (NYSE:HUM) and we are looking at some other health-care stocks.

We just bought a position in AmerisourceBergen (NYSE:ABC), which is drug delivery, so that is purely based on the amount of pharmaceuticals that the United States needs, which isn't exactly correlated to the global economy. The transports are still a little bit too cyclical for me and too expensive.

No positions in stocks mentioned.
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