You've surely heard it said before that "you can either get mad or get even," the inference being that the latter course is clearly going to be more satisfying than simply stewing over a defeat or injustice. So now that the election has been settled and the road has been cleared for enactment of Obamacare on January 1, 2014, the time has come to exact your revenge.
Whether you support Obamacare or are still smarting over the government's gradual takeover of the sector, proponents and opponents alike say that despite the sector's near-term underperformance, the list of winners and losers within the publicly traded portion of the sector is long and diverse.
"It's actually great for stock pickers," says Les Funtleyder, president and fund manager at Poliwogg Investment Advisors. In fact, this former industry analyst and author of the book Health Care Investing says fundamentals actually matter and that sector plays, such as the Health Care Select SPDR (XLV), will leave you wanting or worse.
"If you really want genuine outperformance you're going to have to pick stocks," he says, concurring with my assessment that at least over the past month, when the election was very close, discernible trends within the sector were hard to find. While the sector itself fell 5% at a time when the S&P 500 fell 6%, to me, the delineation between winners and losers was simply in shambles. Yet Funtleyder says there are trends, but you need to look closely and know the companies.
Case in point, Intuitive Surgical (ISRG) and Varian (VAR) have both had great months, Funtleyder says, since they both have new products that improve the quality of health and also lower costs. "If you can improve the quality of health and lower the cost, that makes everybody happy."
On the flip side, he says outsized losses in a (theoretical) money-saving venture like Express Scripts (ESRX) or WellPoint (WLP) are the result of pricing pressure. "You've cut as much as you can, and you just mispriced your book of business."
While HMO's or health insurers generally fared poorly in the lead-up to the election, Cigna (CI) is the exception, since Funtleyder says its business is "generally commercial and away from government programs."
As far as other sub-industries go in the Obamacare era, Funtleyder says big pharma, such as Merck (MRK), should do well as more people simply come into the system. And Biotech (IBB) is also poised to gain, but mostly because he thinks investors will be willing to take more risk.
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