Quote-of-the-day mailing list
Quote-of-the-day@mccanne.org
http://two.pairlist.net/mailman/listinfo/quote-of-the-day
-------- Original Message --------
Subject: qotd: "Obamacare will prove to be a gold mine for astute
traders and investors"
Date: Fri, 9 Nov 2012 12:34:12 -0800
From: Don McCanne <don@mccanne.org>
To: Quote-of-the-Day <quote-of-the-day@mccanne.org>
NOTE: Do not bother reading this article; simply take only three seconds
to skim it. Its essence can be elucidated by reading this one sentence
gleaned from the article: "Obamacare will prove to be a gold mine for
astute traders and investors on the long side and the short side."
MarketWatch
November 8, 2012
26 ways to profit from 'Obamacare'
By Nigam Arora
Obama has been re-elected; "Obamacare" is the law of the land. It
doesn't matter if you agree or disagree with Obamacare, you might as
well generate big profits from it.
Obamacare has been profitable for us. We bought Amerigroup Corp. at
$22.05, and, as of this writing, the stock is at $91.44 — this is a
whopping 315% return.
It wasn't long ago when we aggressively bought Tenet Healthcare at
$20.40. Yesterday THC hit a 52-week high of $27.60.
Here are 26 ways to profit from both the long and the short side.
Hospital stocks
The best way to profit on the long side from Obamacare is to buy
hospital stocks as utilization rates will increase and uncollected
receivables will go down.
Under Obamacare, the pool of paying patients will increase. It is
estimated that currently about 30 million Americans are uninsured. The
increase in the number of paying patients will be huge.
By law, hospitals have to serve all patients who show up at their
emergency rooms including indigents as well as those with no insurance.
Hospitals also have difficulty collecting from low income Americans who
may have no insurance or are underinsured. Some hospitals aren't able to
collect as much as 30% of their billings.
The earnings of some hospitals may increase by as much as 25%.
Our favorite stock in this sector is THC. Other hospital stocks on our
list buy are Community Health Systems, HCA Holdings, LifePoint
Hospitals, and Universal Health Services.
Medicaid HMOs
These HMOs focus on Medicaid and other government programs and will be
big beneficiaries of Obamacare.
We own AGP but it is not suitable for those not in the stock. AGP is
being bought by WellPoint.
Other names on our buy list are Centene Corp., Molina Healthcare, and
WellCare Health Plans.
Medicare Part D
Medicare Part D is a private plan which provides prescription drug
coverage for those eligible for Medicare. Government payments received
by insurance companies for this program are likely to see reductions.
Humana is our top pick to short sell, but we will wait for this stock to
meet all of our six screens before acting.
Branded pharmaceuticals
In the long run, branded pharmaceuticals will be hurt. Obama will be
under intense pressure to reduce rising health care costs in Medicaid
and Medicare. Branded drugs are a sitting duck simply because Big Pharma
sells them for far less abroad than in the United States.
Large-cap pharmaceutical stocks are in favor these days. The market
participants perceive them as safe. The reasoning goes that people will
always be using drugs irrespective of what happens in Europe, China or
to the U.S. economy.
It doesn't hurt that these stocks also pay high dividends. Buying high
dividend stocks is the rage. However Bush tax cuts expire at the end of
this year; if there is no compromise in Washington, income-tax rate on
dividends will jump and high dividend stocks will give up some of their
recent gains.
Secret to making money by short selling is to sell short stocks that are
popular and whose fundamentals are likely to deteriorate. We are short
Market Vectors Pharmaceutical.
We have recently taken profits on Lilly, but we plan to short it again.
Two other stocks to short on our list are Merck and Pfizer.
Generic pharmaceuticals
In the short run, Obamacare is positive for generic pharmaceutical
companies such as Teva, Mylan, and Dr. Reddy's Labs. In the long run,
these companies will suffer as there will be intense pressure on the
prices they can charge. There is an opportunity here on the long side in
the medium term, but it will become a short opportunity in due course.
Medical devices
Obamacare levies a tax on medical devices. Further pressure on medical
device companies such as Medtronic, Stryker, St. Jude Medical, and
Zimmer Holdings to reduce prices will increase.
We plan to short sell these companies when they meet our six screens.
Testing laboratories
There will be more medical tests as more patients are insured. In the
short run, implementation of Obamacare is positive for testing companies
such as Quest Diagnostics and Laboratory Corp. of America.
In the long run, Obamacare is very negative for these companies because
they will come under heavy pressure to reduce rates. These are some of
the best ways to profit from the short side in the long-term.
Drug distributors
As more pharmaceuticals are used, the ruling is positive for drug
distributors such as McKesson, Cardinal Health, and AmerisourceBergen.
Obamacare will prove to be a gold mine for astute traders and investors
on the long side and the short side. The key to making money will be the
timing of entries and exits using a proven method such as ZYX Change
Method. If you cannot short, consider the inverse ETF RXD.
http://www.marketwatch.com/story/26-ways-to-profit-from-obamacare-2012-11-08
Comment: The SEC will affirm that shareholders of health care firms
must always have priority over the patients that should benefit from
their products and services. The Affordable Care Act has expanded
investor ownership within our health care system. As this article
states, "Obamacare will prove to be a gold mine for astute traders and
investors."
Is this what our health care system is all about?
It doesn't have to be this way.
No comments:
Post a Comment