The Zacks Analyst Blog Highlights: SPDR S&P 500, Health Care Select Sector SPDR, Vanguard Health Care ETF, iShares Dow Jones US Healthcare and MGM Resorts International

Zacks


For Immediate Release

Chicago, IL – June 11, 2013 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include SPDR S&P 500 (SPY-Free Report), Health Care Select Sector SPDR (XLV-Free Report), Vanguard Health Care ETF (VHT-Free Report), iShares Dow Jones US Healthcare (IYH-Free Report) and MGM Resorts International (MGM-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Monday’s Analyst Blog:

Will Obamacare Happen Smoothly?

 

A phone survey conducted in early May shows that 64% of uninsured Americans are still undecided about signing up for the Affordable Care Act (:ACA). Conducted by InsuranceQuotes.com, the survey also reveals that more than two thirds of respondents in the low income group are unsure about whether they will be eligible for tax credits which will subsidize the cost of purchasing insurance.

According to the phone survey of 1,001 adult Americans, almost half of the respondents think the new system will make it tougher for them to get tests and procedures done on time. On the whole, the report raises serious doubts about the ultimate success of “Obamacare.”

This is because if enough citizens do not sign up for the ACA, it could end up significantly raising the costs of health insurance. The reason for this is that the benefit payouts to the sick cannot be offset if enough healthy individuals do not purchase insurance as per the program.

The situation is compounded by the 68% with low incomes who are undecided about signing up, though they will benefit the most from ACA. It is they who would receive the largest share of the subsidies.

And this despite the fact that the purpose of “Obamacare” was to widen the safety net, bringing more Americans under the umbrella of health insurance. A large number of citizens would have to pay federal penalties if they do not purchase insurance as per its provisions.

Healthcare ETFs were expected to benefit significantly from health care reform. As of now, they remain an excellent option for the investor. Most have exceeded the performance of the S&P 500 this year. The SPDR S&P 500 (SPY-Free Report) has increased 10.50% over the last three months. On the other hand, the Health Care Select Sector SPDR (XLV-Free Report) has gained 15.87% over the same period.

The story is much the same for quite a few other healthcare ETFs. The Vanguard Health Care ETF (VHT
-Free Report) increased 15.70% over the last three months. The iShares Dow Jones US Healthcare (IYH-Free Report) is up 15.82% over the same period.

The primary issue which may be hindering the enrollment of the ACA seems to be the lack of education. An analyst at InsuranceQuotes.com feels that many individuals are “confused and uninformed.” The reason for this is possibly the fact that the new system requires much detail and is quite complicated.

This lack of information could ultimately lead to a lot of pain for those who decide not to sign up for the ACA. Any major illness would result in substantial out-of-pocket expenses. It would also result in significant losses for insurance companies providing coverage via exchanges mandated by the ACA.

There are, of course, contrarian views. A medical business advocacy manager of the Kentucky Medical Association believes that the complexity of the system created by “Obamacare” would involve substantial costs and discomfort in the beginning. But, over time, it will significantly increase the efficiency of the medical records and billing system.

The need of the hour is greater dissemination of information about the new system. Another major requirement is assistance for the uneducated and uniformed that are having trouble completing the paperwork required to be part of the system. Only then will “Obamacare” succeed in achieving in what it has set out to do.

MGM Resorts Upped to Outperform

We upgrade our recommendation on casino-hotel operator MGM Resorts International (MGM-Free Report) from Neutral to Outperform based on its better-than-expected first-quarter 2013 results and strategic initiatives to spur growth.

Why the Upgrade?

Last month, MGM Resorts’ first-quarter 2013 adjusted earnings of 3 cents per share breezed past the Zacks Consensus Estimate of a loss of 10 cents per share as well as the prior-year quarter loss of 9 cents per share. The bottom line exceeded expectations on the back of an improved top line. Further, the first-quarter results mark MGM Resorts’ return to profitability.

In the first quarter, total revenue grew 3% year over year to $2.4 billon, which also beat the Zacks Consensus Estimate of $2.3 billion. Higher revenues from both Las Vegas and China boosted total revenue in the quarter. Visitation in the Las Vegas market remains strong ensuring a steady recovery from the damage due to the recession five years ago.

MGM Resorts is well-poised to benefit from international and domestic expansion. It is progressing well with its casino-hotel development project in Cotai in Macau and seeks to expand further in Asia. In the domestic arena, it is expected to come up with an outdoor retail and restaurant park in Las Vegas. The company is also considering expansion opportunities in some major locations like Toronto and Western Massachusetts in Maryland. This geographical diversification protects the company from regional downturns.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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