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Sept. 5, 2008, 3:14 a.m. EDT

Healthy choices

Fund manager prescribes AngioDynamics, Magellan Health, KV Pharmaceutical

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By Val Brickates Kennedy, MarketWatch

BOSTON (MarketWatch) -- Jason Ronovech is feeling good about health-care stocks.

The co-manager with Jonathan Vyorst of Paradigm Value Fund /zigman2/quotes/207227431/realtime PVFAX -1.45% is finding that the health-care sector holds plenty of the out-of-favor, undervalued companies he seeks.

Health care had lagged the U.S. market, but the fund managers took a contrarian view; about 13% of the small-cap value fund was recently committed to the sector. The strategy has been rewarding lately, as health-care stocks have rebounded.

"We like companies with solid core businesses that can go to another level with a market approval or by entering a new market," Ronovech said.

The fund, with about $120 million in assets, focuses on companies with market values ranging between $200 million and $3 billion.

AngioDynamics

/zigman2/quotes/200001965/composite ANGO 22.12, -0.07, -0.32%
ANGO

Ronovech said one particularly attractive investment is medical device group AngioDynamics Inc. /zigman2/quotes/200001965/composite ANGO -0.32% , which specializes in treating peripheral vascular disease.

"They have a nice history of innovation that has allowed them to get quite a big market share against other larger guys," Ronovech said.

What also makes AngioDynamics appealing, he added, is its recent acquisition of RITA Medical Systems, a maker of ablation systems used to treat cancerous tumors. In addition, the company has acquired a new technology called IRE that is used to enhance the tumor-fighting capabilities of chemotherapy drugs.

According to Ronovech, the company's ablation business is seeing strong growth of around 20% a year, or about twice the rate of its vascular business.

On Thursday, shares of AngioDynamics lost 4.2% to $15.41.

Magellan Health Services

MGLN

Ronovech also is partial to Magellan Health Services Inc. , which specializes in managing mental health services and benefits.

"They're a niche company and they dominate," Ronovech said.

"They're interesting because they're also getting into radiology benefits management and the distribution of specialty pharmaceutical products," he added. "We like the stock because it's not as risky as regular benefits managers, like HMOs."

As an added bonus, Ronovech said, Magellan also has authorized a plan to buy back up to 15% of its shares.

In trading Thursday, shares of Magellan Health Services lost 1% to $43.99.

K-V Pharmaceutical

KV.A

Another favorite is K-V Pharmaceutical Co. , which markets both branded and generic drugs. The drugmaker also sells a broad line of products targeted at prenatal and women's health care.

Ronovech said he particularly likes the company's diverse product portfolio, which includes generic formulations of AstraZeneca plc's /zigman2/quotes/200304487/composite AZN -1.78% popular cardiac drug Toprol, also known as metoprolol. He notes that K-V now holds about a 50% stake in the generic Toprol marketplace.

Ronovech also sees strong growth potential for Evamist, a topically-applied hormone replacement therapy for the treatment of hot flashes in women.

"These products will help drive growth," Ronovech said.

Shares of K-V Pharmaceutical lost 0.6% on Thursday to $22.55.

/zigman2/quotes/207227431/realtime
US : U.S.: Nasdaq
$ 63.20
-0.93 -1.45%
Volume: 0.00
Jan. 21, 2022
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/zigman2/quotes/200001965/composite
US : U.S.: Nasdaq
$ 22.12
-0.07 -0.32%
Volume: 470,809
Jan. 21, 2022 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$859.12 million
Rev. per Employee
$379,094
loading...
/zigman2/quotes/200304487/composite
US : U.S.: Nasdaq
$ 59.10
-1.07 -1.78%
Volume: 5.89M
Jan. 21, 2022 4:00p
P/E Ratio
93.28
Dividend Yield
2.32%
Market Cap
$187.08 billion
Rev. per Employee
$452,181
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Val Brickates Kennedy is a reporter for MarketWatch in Boston.

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