The US healthcare sector is booming due to a combination of Obamacare and the approval of new medicines, for example hepatitis C. But it can be tricky to know which stocks to pick in such a broad area covering bio tech, pharmaceuticals, services and device manufacturers.

As a result, Damien Conover, Director of Healthcare Research, at US research firm Morningstar, suggests investors look at the company's valuation: "within each one of the industries, we see some stocks that are definitely undervalued and certain stocks that are overvalued".

Firstly, Damien explains that the 'big pharma' space is where the dividends are very secure. He thinks Sanofi is undervalued, but on the other hand he has concerns with AstraZeneca and Bayer's valuations.

Within biotechnology, in the undervalued camp, Morningstar "really likes" Gilead, as it has had a nice pullback and David thinks that offers investors a good upside, especially with the marketing of a new hepatitis C product. 

However, Damien feels Biogen Idec looks overvalued, because while it has great new products, he thinks "that's more than baked into the valuation right now".

On the device side, Damian favours Cooper Companies. The firm is introducing a new contact lens product.

And finally on the services space, he suggests investors look at the pharmacy benefit management space; where specialist firms negotiate drug prices. Express Scripts and Catamaran "looked very well-positioned for upside on the valuation", according to Damien.