Maybe it's just a coincidence, but I can't help noticing that the Morgan Stanley Health Care Payors HMO Index (^HMO) is just coming off it's best week of the year; a 7.6% pop that coincided perfectly with the Supreme Court's historic 3-day hearings on the Obamacare law.
For healthcare analysts like Marshall Gordon of Clear Bridge Advisors, the leadership of the managed care companies is not surprising, given that many observers feel that the so-called individual mandate is the most vulnerable portion of the law.
"So if those provisions were to come out, they (managed care and hospital companies) could have potentially better profits within their businesses," Gordon says, pointing out that the insurance companies are uniquely positioned to prosper given that they provide both commercial coverage to businesses as well as public coverage to state and federal governments.
As much as Pfizer (PFE), Johnson & Johnson (JNJ), and Gilead (GILD) also had market beating weeks, Gordon chalks up their out-performance to a general shift towards defensive stocks rather than a play on the Supreme Court case.
"I think the impact of the Supreme Court on the equipment or product makers, and that includes pharma and biotech, is relatively modest," he says, unless the whole gets struck down.
But with new estimates now pegging the cost to insure a family of four at $20,000 a year, Gordon thinks that cost control is also going to be a key issue.
"I'm a little bit less bullish on the long-term prospects for the product makers simply because I think we're going to see more on limitations on utilization and more push-back on price," he says, adding that our aging population or "demographic shift'' will keep demand strong while bolstering efforts to increase cost containment.
In referring to the health insurance companies as ''the key beneficiaries," Gordon names companies like United Health Group (UNH), Aetna (AET), WellPoint (WLP), and Humana (HUM) as large cap examples, as well as smaller names like Centene (CNC), Amerigroup (AGP), and Molina (MOH).
As he sees it, regardless of what the SCOTUS decision in June, the "public sector is one of the most robust areas for growth within the health care world."
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- Marshall Gordon