Chris Hill: When you look at health care in 2012, what stands out as the major storylines for the year?
David Williamson: Sure thing, Chris. I think there were actually a number of key storylines. I singled out about five that I want to point out, but I think first, above all we're investors, and it's really interesting that health care, after being somewhat of a sleepy sector, really just outperformed everyone by a wide margin.
The S&P and the NASDAQ were up about 15% for the year, so a good year on the markets. Health care returned over 30%, around 32% year to date. All the attention goes to technology, often. Apple has had such a tremendous run, but the technology sector only gained, in aggregate, about half of what health care did.
I think it's generally considered a defensive sector, but because of the tailwinds at its back, the aging population, and the fact that it is somewhat defensive as far as pricing -- even in a down economy -- really helped lead to outperformance.
Chris: We also had the landmark decision by the Supreme Court, in terms of Obamacare.
David: That's exactly where I was going. I think that's a large part of it, because it helped bring some certainty to it.
You saw a lot of beaten-down parts of the health care industry really get a boost; hospitals, for instance, like HCA and Tenet now -- instead of having all this bad debt of uninsured people coming in, they have to treat them, and they're not going to see a dime -- going forward even if they're collecting $0.30 on the dollar, that's still better than zero cents on the dollar.
David: There are, obviously, a lot of negatives for some businesses; medical device companies now have to pay a 2.3% excise tax on sales, not income, so that's very painful for them. There are other facets as well, as far as insurance companies -- how much they have to spend on their customers and what they can discriminate for, although a lot of that doesn't roll out until 2014.
But the fact that it was upheld means that it is going to roll out. These businesses can plan and prepare for it, and it's really a whole new frontier, as far as health care in this country.