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 not qualify for coverage from major insurance companies, either because of their driving record or their credit history. Weaver says, “They have a strong management team and, even though it is fairly new to the New York Stock Exchange and does not have trailing earnings, I think this is an attractive stock.”
KILA WEAVER’S Private Screening Picks

Company Exchange: Symbol	Price*	12- to 18-Month Price Target	P/E on Projected 2004 Earnings	Est. 5-Yr. Annual EPS Growth Rate	Why Stock Will Outperform
Sybron Dental Specialties NYSE: SYD	$28.64	$30.00	18.03%	10.00%	Company makes high-quality products in the dental market and has good market share.
DaVita NYSE: DVA	$44.89	$48.00	14.50%	14.00%	Company has a good distribution of centers across the country where it provides dialysis-related services for patients. It also has a strong management team.
Willis Group Holdings NYSE: WSH	$36.52	$42.00	13.57%	13.75%	The company’s strategy of offering risk management consulting to clients is a good profit-making strategy.
Bristol West Holdings NYSE: BRW	$22.30	$24.00	29.46%	14.00%	Its ability to offer affordable auto insurance to people who may not qualify at other insurance companies will increase its profits.
*As of Feb. 13 (Feb. 16 was Presidents’ Day.)