A Niche In Time

A Niche In Time

Financial services and healthcare sectors will yield outstanding returns in 2004, says Kila Weaver, managing director and financial analyst at Capital Management Group Securities.
According to Weaver, companies in the healthcare industry will benefit because of the nation’s rapidly aging population and the growing need for medical services. “We are not a terribly healthy population overall, and as long as the current demographic trends continue, I think that there [will be] a lot of attractive companies in the healthcare space,” she says.

In the financial sector, Weaver expects insurance companies to shine, noting that recent industry consolidation should give an edge to companies that offer specific products focused on niche markets. “These are the areas we think have the greatest potential for price increases and earnings growth going forward,” she says.

Weaver says that Chicago-based Capital Management, an investment banking firm that provides equity brokerage and research services to institutional investors, asset managers, and public and corporate pension funds, cautions against some caveats that might interrupt the positive forecast for healthcare and financial services. The U.S. involvement in Iraq, investor apprehension about another terrorist attack on U.S. soil, the weak dollar, and the economy’s inability to create new jobs are all factors the company considers when selecting small- and mid-cap stocks. Capital Management has been successful at selecting stocks on the cusp of achieving greater market share and greater revenues because it emphasizes companies with the following attributes: They have a market capitalization of more than $500 million, a strong management team, a reputation for being players in a niche market, and a unique approach to providing products or services in their industries.

Weaver’s first selection, Sybron Dental Specialties Inc. (NYSE: SYD), makes products for the medical and dental markets. She says the Orange, California-based firm has a unique market advantage because it operates in two areas: professional dental and orthodontics. “Their tools are known to be of a very high quality and they have good market share,” says Weaver.

Another company in the healthcare space is DaVita Inc. (NYSE: DVA), a provider of dialysis and related services for patients suffering from chronic kidney failure. The El Segundo, California-based firm operates more than 500 outpatient dialysis centers that serve more than 45,000 patients in 33 states. “They have performed very well in the last few years and have a very strong management team and a great distribution chain,” Weaver says.

In the financial services sector, Weaver likes Willis Group Holdings Ltd. (NYSE: WSH), a London-based company that provides management consulting and insurance brokerage services. Willis provides its global clients in the construction, aerospace, marine, and energy industries with specialized risk management services. “I like this company because they are moving away from delivering insurance products to doing risk management consulting, and the demand is very strong in that area,” says Weaver.

Weaver is also keen on Bristol West Holdings Inc. (NYSE: BRW), a company that provides non-standard, private-passenger automobile insurance. Headquartered in Davie, Florida, Bristol West offers insurance products in 17 states to people who may