Insurance and healthcare revival: Kiln Weaver's focus on out-of-favor industries delivered solid returns.

When Kila Weaver, senior managing director and financial analyst at Capital Management Group Securities, spoke to BLACK ENTERPRISE last year, she was focused on small and mid-cap firms in the financial services and healthcare industries. She explained that there were stocks in these sectors that had great potential for price increases and earnings growth.

One year later, Weaver's words ring true. Her portfolio of stocks posted a 19.68% return during the 52-week period from Feb. 13, 2004 to Feb. 11, 2005. "Overall we did all right," says Weaver of the portfolio's performance. "It's a good idea to look at industries where the fundamentals are sound, but some sectors are out of favor. That's especially true of insurance and healthcare, which, for several years, were not as attractive among investors as some other sectors."

With the number of older Americans on the rise and vast numbers of Americans with health problems, Weaver says the healthcare sector is an attractive one. "I still stand by what I said last year in that the healthcare sector is going to remain a solid investment opportunity for U.S. investors simply because of the fundamentals and the demographics. That's not going to change."

Weaver's best performer was DaVita Inc. (NYSE: DVA), a provider of dialysis and related services for patients with chronic kidney disease. The stock raced to a 45.51% gain, increasing from $29.93 to $43.55 a share. "In the healthcare industry you can find little gems, and DaVita is definitely one of them," says Weaver. "The company had some regulatory issues and that made investors shy about buying the stock, but those problems proved to be immaterial."

Weaver's other pick in healthcare was Sybron Dental Specialties Inc. (NYSE: SYD), which makes products for the medical and dental markets. The company's stock rose from $28.64 to $38.06, a 32.89% return on investment. "Sybron is a niche player and a high-end supplier of quality instruments for orthodontics and dentistry. Because so many dental providers still have not consolidated their operations, there is a lot of opportunity for Sybron," Weaver says. "It's a company that benefits from people in the profession referring other professionals to their products."

In the financial sector, Weaver chose Willis Group Holdings Ltd. (NYSE: WSH), a London-based company that provides management consulting and insurance brokerage services. The firm provides services to the construction, aerospace, marine, and energy industries, among others. "They've done a great job at executing their strategy and transitioning from a traditional insurer to a provider of risk-management services," says Weaver. The company's stock price reflected its strategy taking hold as its stock price moved from $35.77 to $37.76 per share, a 5.56% increase.

The one stock in Weaver's portfolio that slid was Bristol West Holdings Inc. (NYSE: BRW) a company that provides non-standard, private passenger automobile insurance. Its stock fell 5.25%, from $22.30 to $21.13 per share. While Weaver thinks the firm's business model is still sound, she recognizes it will have challenges moving forward. "Bristol West's business model is a bit more difficult to execute because the company is an insurer of people who are high-risk candidates for insurance policies," Weaver says.