"The health care picks in our growth portfolio should prosper whatever the outcome of the raging health care debate," suggests Stephen Leeb.
In The Complete Investor, he explains, "That's because they're leveraged to demographic realities, and in particular to the tide of aging baby boomers," Here, he reviews on portfolio holding -- Teva Pharmaceuticals (NASDAQ: TEVA).
"Israel-based Teva Pharmaceutical is the world's largest manufacturer of generic drugs.
"Capitalized at $49 billion, Teva pulled in some $11 billion in revenues in 2008, with generic drugs contributing more than two-thirds of those sales.
"Baby-boomers are spending increasing amounts of money on prescription drugs. Further, generics sell for a lot less than their brand-name counterparts and thus are more likely to be better covered by insurance, actually benefit from economic downturns as consumers cut back on spending.
"In general, demand for drugs is relatively inelastic, while a growing number of brand-name medications are now coming off patent. This puts Teva on track for long-term earnings growth of close to 20% a year, a torrid pace in any economy.
"In its latest earnings report, the company reported second-quarter profits of $742 million excluding onetime costs, a 25% increase over year-earlier results.And rare today, its U.S. sales were particularly strong—up 36% and accounting for 63% of all sales.
"Teva's new generic version of the hyperactivity drug Adderall helped revenues grow by 20 percent, to $3.4 billion, in the second quarter.
"In addition, sales of Copaxone, Teva's brand-name multiple sclerosis drug, which accounts for around 20% of company-wide revenues, were stronger than expected.
"Also aiding results was last year's $7.4 billion acquisition of Barr Pharmaceuticals, which Teva's management now expects will lead to savings of $500 million next year rather than the $300 million initially projected. In all, management expects profit growth next year of 35%.
"In a sector full of question marks, generic drugs, and thus industry leader Teva, are as close to a surefire winner as you can get. Trading at less than 12 times expected 2010 earnings, with a PEG of 0.6, shares are a bargain."
