Market upswing: portfolio manager Ted Parrish is banking on financial and healthcare sectors for long-term growth - Private Screening

Black Enterprise, Dec, 2003 by Nicole Lewis

Theodore L. Parrish is confident the U.S. economy is headed for a robust turnaround in the next 18 months. Not only does the money manager believe the recovery is real, he thinks it will be sustainable since companies are more likely to spend on improvements in infrastructure. He sees other positive signs such as continued consumer spending and a strong housing market. Against this backdrop, he is looking at sectors that have waned in recent years but which have upside long-term growth potential.

Parrish wears two hats. As principal and director of investments at Marietta, Georgia-based G.W. Henssler & Associates Ltd., he manages research and trading activities. As co-portfolio manager of the $88 million Henssler Equity Fund, he has the hands-on job of picking stocks that will yield profits.

The first stage of the stock selection process is reviewing ratings computed by Value Line, a firm that provides investment research on stocks, mutual funds, options, and convertibles. "We only buy companies that have an A rating or better for financial strength or companies that have an A--or better for S&P earnings and dividend quality strength," explains Parrish. "Next, I screen by volume. We only buy companies that trade 150,000 shares a day."

Parrish is looking particularly to the healthcare, technology, and financial services sectors. Two of his health-related top picks are prescription drug maker Pfizer Inc. (NYSE: PFE) and Cardinal Health Inc. (NYSE: CAH), which provides pharmaceutical and other healthcare products and distribution services.

Parrish believes Pfizer will continue to generate tremendous revenue with healthcare spending on the rise; fears regarding patent expiration and talk of competition from generic drugs are being overblown. "This company has some of the most popular drugs available ... drugs that earn the company billions of dollars per year," he explains. Parrish likes Cardinal Health because "it's well run. They have good margins, low cost structure, and a strong cash flow, and they will benefit from an increase in prescription drug use."

On the financial front, Parrish likes American International Group Inc. (NYSE: AIG), which provides life insurance, financial services, and retirement saving and asset management. "Companies like American International are in a great position because they are in a favorable underwriting cycle. They have pricing power. Premiums have been up for the past year or two, since 9-11," he adds.

One technology company Parrish is banking on is Affiliated Computer Services Inc. (NYSE: ACS), which provides business process and information technology, outsourcing solutions, and systems integration services to corporate and government clients. Local and state government work made up 41% of the company's fiscal revenues in 2002, and federal government work accounted for another 26%. "As the government continues to cut costs and streamline operations, Affiliated Computer Systems will continue to receive government contracts," Parrish says.

He also likes beverage and snack food manufacturer PepsiCo Inc. (NYSE: PEP). Popular items such as Lay's Potato Chips, Doritos, Cheetos, as well as Tropicana Pure Premium Orange Juice, Pepsi Cola, and Quaker Oatmeal are items that have dominated the market. "(PepsiCo) is a diversified company that knows how to make money."

Company                                        12- to 18-Month
Exchange: Symbol               Price*           Price Target

Pfizer Inc                     $30.53              $44.00
NYSE: PFE

Cardinal Health Inc             57.90               68.00
NYSE: CAH

American Intl Group Inc         58.00               70.00
NYSE: AIG

Affiliated Computer Serv Inc    49.99               62.00
NYSE: ACS

PepsiCo Inc                     45.51               60.00
NYSE: PEP
                                                   Est. 5-Yr.
Company                    P/E on Projected        Annual EPS
Exchange: Symbol             2003 Earnings         Growth Rate

Pfizer Inc                      17.8                13.6%
NYSE: PFE

Cardinal Health Inc             15.9                18.3
NYSE: CAH

American Computer Serv Inc      18.6                20.2
NYSE: ACS

PepsiCo Inc                     45.51               60.00
NYSE: PEP

Company                           Why Stock Will Outperform
Exchange: Symbol

Pfizer Inc                     Healthcare spending is on the rise.
NYSE: PFE                      Products will
                               remain popular.

Cardinal Health Inc            Company will benefit from
NYSE: CAH                      increased prescription drug
                               use; has low cost structure,
                               strong cash flow.

American Intl Group Inc        Stock will benefit from
NYSE: AIG                      higher premiums.

Affiliated Computer Serv Inc   Local, state, and federal
NYSE: ACS                      government business
                               and commercial outsourcing
                               business is growing.

PepsiCo Inc                    They have popular products that
                               will continue
                               to dominate the market.