Looking back through 2008, the Healthcare sector has hit some huge hurdles. Patent concerns and expirations were worries for all major firms, the Department of Justice hit Med Tech with fines, Big Pharma made thousands of job cuts, Managed Care got demolished with enrollment cuts, and investors struggled to find much, if any safety in the whole sector. Going forward, 2009 will be quite an interesting year in the markets and the ever-so struggling economy. More M&A activity and consolidation will not only be seen within the Financials sector, but will also spread across other sectors. We have seen this ramp up quite a bit in Due to lofty predictions by some analysts regarding unforeseen buyouts of large Biotech firms by Big Pharma, heated debates on the Street will be prevalent. Some names that have been thrown out are Merck buying Gilead and Pfizer purchasing Amgen. Although those are pretty big bets, nonetheless, it will be quite an exciting year ahead. When looking to invest in Healthcare, there are five things I would like you to keep in mind:

1. Stay away from pure play Big Pharma

Big Pharma is desperate and they have been way too reactive to the current problems that address the entire sector. Yes, they have tried to develop alternative revenue sources from some acquisitions, but this should have happened when debt financing was more readily available in the past few years. They knew that they would be faced with this large debacle, but they waited to actively pursue firms when we are in the worst credit crisis seen in history. Firms that have a large source of their revenue coming from Pharma but also from other sub-sectors are a great play. I like Abbott Laboratories (ABT: 52.71, 0.00 (0.00%)) and Johnson & Johnson (JNJ: 58.93, 0.00 (0.00%)) for those reasons.

• Firms to look into: Novartis (NVS: 47.79, 0.00 (0.00%)) because of the Sandoz division and their generic exposure and Merck (MRK: 29.09, 0.00 (0.00%)) with their new division, BioVentures, a play on biologics

2.