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Which Sectors, Companies Will Continue to Benefit From the Recovery?

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You don't want to be in stocks where the expectations have been modeled...you want to find the companies that can still surprise to the upside when they report earnings.

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We have some of those types of companies like CERN. We're not as interested in the health-care providers because the providers may be challenged under the current set of Obamacare rules, so we are not exactly sure where that's going to shake out depending on the election.

We are certainly more focused on the companies that can take market share in the places that we know they are already competing, companies that are making drugs, in particular the generic drug business, like at a company called Mylan (NASDAQ:MYL).

Mylan is the largest United States generics company, and it has been slowly but surely taking market share in generics. The cost of name-brand drugs and the cost of health care have been quite high, so this is a long-term secular play.

At the same time, what we have seen-particularly in Europe-is very low generic penetration. The United States is closer to over 50% penetrated, so that most of the drugs that get prescribed in the United States are generic (and have an opportunity to be sourced by a company like Mylan), whereas Europe is a lot closer to 20% to 25% penetration.

We believe that the recession in Europe may actually help companies like Mylan gain some market share, and as Europe starts to slowly realize they need to save costs in health care or prolong their own economic pain.

No positions in stocks mentioned.
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