Ignoring politics, how can investors make money on health care stocks?
A key element of the “Affordable Cara Act” (ACA), otherwise known as “Obamacare”, kicks in today – health insurance exchanges. Politics aside, is there a buck to be made by investors?
The Republican-controlled House of Representatives offered up federal spending bills that would the government going but delay Obamacare’s implementation. But, the Democrat-controlled Senate rejected the House’s spending bills, leading to a government shutdown of “non-essential” services for the first time in 17 years. However, the shutdown won’t affect the health insurance exchanges because Obamacare is considered by the feds to be “mandatory” like, say, border patrol or Social Security.
(Read more: For it or against it, Obamacare exchanges are open)
With both sides accusing each other trying to raise health care costs, it’s unknown how long the acrimonious stalemate will last. What we do know is this: health care is about 15% of the US GDP and there are plenty of publicly-traded companies that will benefit with rising spending.
So, ignoring politics, how can investors make money on health care stocks?
Talking Numbers looks at the Health Care SPDR ETF (the XLV) to see if there’s a trading opportunity in health care. It includes pharmaceuticals, biotech, providers, equipment, and technology companies. Nearly a third of the 55-stock ETF’s holdings are in Johnson & Johnson, Pfizer, and Merck. From the day Obamacare was signed into law (March 23, 2010), the ETF is up 57%. Since the start of this year, it’s up 27%.
Taking on the fundamentals is CNBC contributor Zachary Karabell, founder and president of River Twice Research. Tackling the XLV’s charts is Talking Numbers contributor Richard Ross, Global Technical Strategist at Auerbach Grayson.
As a major piece of Obamacare starts today, should investors buy the health care ETF? Watch the video to see what the fundamentals and technicals have to say about it.