Top Funds Buy Defensive Health Care Stocks

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IBD Special Report: Mutual Fund Monthly

Heading closer to the end of the year and the fiscal cliff, managers of top-performing funds the past three months have been slow to make big bets on a market direction.

Leading funds have been easing into defensive sectors, such as medical stocksResMed ( RMD ),Watson Pharmaceutical ( WPI ),Illumina ( ILMN ) andHCA Holdings ( HCA ), in their latest reporting periods.


The Lipper health/biotech group was the best-performing sector year to date through Nov. 30, with a 21.34% gain.

Top funds continued to bank on financials, especially credit card processors, includingVisa ( V ), NetSpend Holdings (NTSP),FleetCor Technologies (FLT) andPortfolio Recovery Associates (PRAA).

The group is expected to do well as consumers ring up holiday purchases. As of Tuesday, the industry was ranked No. 26 among IBD's 197 industries.

IBD found 19 best-performing funds added ResMed, investing an estimated $5.2 million. The $6.4 billion Calamos Growth Fund added shares as of its latest reporting period.

The San Diego, Calif.-based firm makes medical devices to treat, diagnose and manage sleep-disordered breathing (SDB) and other respiratory disorders.

SDB includes a wide range of respiratory disorders from snoring to obstructive sleep apnea. It affects about 20% of the adult population.

ResMed has clocked solid double-digit earnings growth, rising 29%, 38% and 42% in the past three quarters. But revenue growth has been slowing for the same period.

After breaking out in early August, the stock made a healthy run to a 52-week high of 42.30 on Oct. 24. Since then, it's been trading sideways in a flat base.

Sell Side

The nation's top funds were taking profits of big media issues, such asWalt Disney (DIS),News Corp. (NWS) andTime Warner (TWC). These stocks have performed well this year, but have pulled back in recent months.

There were 31 net sellers of Walt Disney. The $20.7 billion Fidelity Balanced Fund unloaded some shares in its latest reporting period.

Building stocks have benefited from improving signs of activity.Weyerhaeuser (WY),Snap On (SNA) andMasco (MAS) were among those sold by leading funds. They're trading near their 52-week highs.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Mutual Funds

Referenced Stocks: HCA , ILMN , RMD , V , WPI

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