The Wall Street Journal-20080116-Fumd Track- Cure for Market Woe- Mr- Sustersic-s Fund- Touchstone Stock-Picker Scores With Health Care- A Bet on Stable Plasma
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Fumd Track: Cure for Market Woe? Mr. Sustersic's Fund; Touchstone Stock-Picker Scores With Health Care; A Bet on Stable Plasma
If the lead manager of last year's best-performing health-care mutual fund has an elaborate strategy, he isn't divulging it.
"There's just a lot of good stock picking," Frank Sustersic said of his team's approach to managing Touchstone Healthcare & Biotechnology Fund. He is a portfolio manager with Turner Investment Partners Inc. of Berwyn, Pa., which subadvises the fund for Cincinnati-based Touchstone Investments.
Mr. Sustersic's team, which includes co-managers Heather McMeekin and Vijay Shankaran, casts a wide net across the sector, holding pharmaceutical, biotechnology, medical-device and health-care services stocks. Most are large-capitalization stocks.
The result? The $62 million fund had returns of 25.4% in 2007, ranking atop Morningstar Inc.'s list of health-care funds and significantly outpacing the 5.5% returns for the Standard & Poor's 500-stock index. Through Monday, the fund was up 1.68%, handily besting the index.
The Touchstone fund's picks last year included drug maker Gilead Sciences Inc., health-products company Baxter International Inc. and Intuitive Surgical Inc., which makes a robotic surgery system.
Gilead shares rose more than 40% during 2007 and closed yesterday at $47.22, up an additional 2.6% for 2007. HIV drugs, including Truvada and Atripla, are the cornerstone of the Foster City, Calif., company's lineup.
"They're a leader in the infectious-disease segment, and they have a core franchise in HIV," Mr. Sustersic said. "It's a disease that's becoming diagnosed more quickly, more rapidly."
Mr. Sustersic said Gilead's HIV drugs gained market share from rival GlaxoSmithKline PLC. In addition, the U.S. Food and Drug Administration last year approved its Letairis drug for treatment of pulmonary arterial hypertension, a form of high blood pressure.
Another stock that helped the fund, Baxter, rose 25% in 2007 and has climbed 9.2% so far this year, to $63.41 yesterday. The Deerfield, Ill., company makes a range of health-care products that include therapies derived from blood plasma, such as a treatment for hemophilia.
Mr. Sustersic said the plasma market has become more stable in recent years, and companies such as Baxter have gained pricing power.
The Touchstone fund has owned shares in both companies for a couple of years, and they remain among the fund's core holdings despite their increased valuations, he said.
One holding Mr. Sustersic has trimmed is Intuitive Surgical. The stock more than tripled in 2007 and trades around 80 times projected 2008 earnings. The Sunnyvale, Calif., company makes the da Vinci Surgical System, which uses robotics to assist surgeons in such sensitive procedures as prostate removals. The stock has fallen 21% this year, closing yesterday at $256.22.
