Where are the best investment opportunities?
I am most bullish on energy and health care over the next five years. Energy stocks are likely to outperform because of strong demand from China and India in the developing world. They’re also an inflation hedge at a time when I believe the risk of inflation is high. I expect health-care stocks to outperform because the demand for health care will increase dramatically as the population ages in the U.S., Europe, and Japan. The health-care sector has lagged the overall market by nearly 37% — not including dividends — since the start of the recent cyclical bull market on Oct. 9, 2002. Valid concerns regarding future drug pricing, the effects of a Medicare prescription-drug benefit, and patent expirations on key blockbuster products pushed the pharmaceutical sector into a relative bear market just as practically all other asset classes rose over the past 26 months. Plus, troubles with existing drugs at Merck (MRK ) and Pfizer (PFE ) haven’t helped. So valuations for many health-care com
