5 Stocks to Avenge a Bad Court Ruling

by Traders Reserve | July 2, 2012 1:30 pm

healthcare2 5 Stocks to Avenge a Bad Court RulingI’m not an attorney, nor am I a Constitutional scholar. However, one doesn’t have to be either to recognize compulsion is evil.

Of course, I am referring to the decision by the Supreme Court to uphold the main provision of the “Obamacare” health law[1] that mandates we all purchase health care or be “taxed” if we don’t. Those of us who are perturbed, dismayed and otherwise saddened by the decision are feeling a sense of fear over the encroachment on our individual liberty that the highest court in the land has just sanctioned. The question now becomes—what are we going to do about it?

There are only two answers here that apply. The first is to change things via the ballot box, and that means electing politicians who aren’t in favor of the march toward complete government control of the nation’s health care system.

The second answer is to get your revenge by investing in — and profiting from — companies likely to benefit[2] from the newly passed health care law.

1) UnitedHealtcare

Health insurers are going to see a big influx of new customers thanks to the individual mandate, and according to Congressional Budget Office estimates, that number will be around 22 million who buy private insurance through new insurance exchanges. That’s good for industry giant United Healthcare (NYSE:UNH[3]), as they will surely capture a chunk of this soon-to-be-tapped market. UNH also is the biggest provider of Medicare Advantage plans for the elderly, and with an aging baby boomer demographic, that gives UNH another solid source of upside in the future.

2) Hospital Corp of America

By far, the biggest winning health care sector as a result of to the Supreme Court’s decision is hospitals. The influx of new customers with insurance, and the ability to pay for services, will be a revenue windfall for hospitals, and that’s one reason why so many stocks in the sector soared immediately following the High Court’s ruling. One such winner is Hospital Corp of America (HCA[4]), which saw its shares surge nearly 15% since the law was upheld.

3) Health Management Associates

Another hospital stock that’s seen a huge surge since the ruling is Health Management Associates (NYSE:HMA[5]). The company also will likely benefit from a huge influx in insured patients, and though there will be more controls on services put in place by Obamacare, it will more than be made up for by the increased revenue hospital companies such as HMA are destined to get from the new law.

4) Quest Diagnostics

Medical testing firm Quest Diagnostics (NYSE:DGX[6]) provides all kinds of services that test and diagnose health conditions. Before a patient can be treated, hospitals and doctors need to know what the problem is, and Quest makes the tools and provides the services used in this determination. With more customers in the system, the company likely will see a big surge in revenue due to the health care law. The market certainly agrees, as the shares surged immediately following the Court’s decision.

5) Health Care Select Sector SPDR

Now that the health care debate has been decided, there will be more sense of stability in the sector. That’s good news for the biggest health care stocks out there, and one way to own those stocks is via the Health Care Select Sector SPDR (NYSE:XLV[7]). This exchange-traded fund (ETF) holds the biggest and best companies in the health care industry, and now that the uncertainty over which way the court will go is out of the way, stocks in the sector will adjust to the “new normal” conditions. One thing the market loves more than anything is certainty, and even if the court’s ruling was a bad one, at least we aren’t wondering what it will do any longer—and that’s a positive for stocks in the space.

Endnotes:
  1. Supreme Court to uphold the main provision of the “Obamacare” health law: http://www.usnews.com/opinion/blogs/economic-intelligence/2012/06/29/supreme-court-healthcare-ruling-dooms-small-businesses
  2. companies likely to benefit: http://investorplace.com/2012/06/a-ruling-thats-good-for-health-care-stocks/
  3. UNH: http://studio-5.financialcontent.com/investplace/quote?Symbol=UNH
  4. HCA: http://www.barchart.com/quotes/stocks/HCA
  5. HMA: http://studio-5.financialcontent.com/investplace/quote?Symbol=HMA
  6. DGX: http://studio-5.financialcontent.com/investplace/quote?Symbol=DGX
  7. XLV: http://studio-5.financialcontent.com/investplace/quote?Symbol=XLV

Source URL: http://investorplace.com/2012/07/5-stocks-to-avenge-a-bad-court-ruling-xlv-dgx-hma-hca-unh/
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