For Immediate Release
Chicago, IL –June 28, 2012 – Today, Zacks Investment Ideas feature highlights Features: ProShares Ultra Health Care ETF (RXL), ProShares UltraShort Health Care ETF (RXD), Direxion Daily Healthcare Bull 3x Shares (CURE) and Direxion Daily Healthcare Bear 3x Shares (SICK).
Health Care ETFs & the Future of Obamacare
In summary, if the individual mandate is thrown out, it looks likely to spell bad news for the entire sector. That is because the mandate would add a ton of cheap-to-ensure people to the rolls of HMOs while it would drive up demand for devices, services and drugs, helping pretty much the entire industry.
If the bill is upheld in its entirety, a much more mixed outlook could be the result. With that being said, it will definitely be a big win for pharma, and to an extent healthcare providers and service companies as well. However, medical device makers look likely to be hurt by the ruling due to new taxes, while biotech could suffer from a similar issue as well (see Medical Device ETFs: A Better Way To Play Health Care?).
Lastly, if the entire bill is deemed unconstitutional, which at this point seems unlikely, it also could produce a mixed result. Broad health care is likely to stay about even, but investors could see a modest uptick for device makers and biotech, while pharma and the HMO market could be losers due to lower demand for their services.
Beyond these unleveraged choices, investors also have a few ways to play the decision with leverage. In total, there are four ETFs in this segment of the fund world, offering investors exposure to both bull and bear 2x strategies as well as both directions in 3x form as well:
ProShares Ultra Health Care ETF (RXL)/ ProShares UltraShort Health Care ETF (RXD)- These two products track, respectively, the 2x and -2x versions of the Dow Jones Health Care Index. This benchmark is heavily weighted towards big pharma, but it is still relatively spread out among its 122 securities.
Direxion Daily Healthcare Bull 3x Shares (CURE)/Direxion Daily Healthcare Bear 3x Shares (SICK)- These two products track, respectively, the 3x and -3x versions of the Health Care Select Sector Index. Much like their ProShares counterparts, these funds have a focus on big pharma, although they have a heavier level of concentration in their top securities, only holding 52 stocks in total (read Understanding Leveraged ETFs).
While the volumes on these products aren’t exactly the most robust in the ETF world-- suggesting relatively wide bid ask spreads-- they could see higher levels of activity leading up to and immediately following the in-focus decision. Given this, these products could be the way to play the situation, although investors should be prepared for a great deal of volatility and uncertainty no matter what health care stocks or ETFs they hold immediately following the pivotal Supreme Court ruling.
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