Plenty of damage has already been done as the federal government shutdown enters its second week.
While the House passed a bill that approved pay for federal workers — in an attempt to erase at least a chunk of the estimated $300 million being lost per day — the Senate appears unwilling to do the same. Regardless, the effects spill far beyond the wages of government employees.
Countless contractors remain out of work, while important data for investors — like Friday’s job report — has been postponed. With no clear end to the budget battle in sight and the debt ceiling crisis looming, volatility is the order of the day.
Zooming in from the macro effects, several sectors and individual stocks have been especially hard-hit by Washington’s standstill, while the implementation of the Affordable Care Act (which caused the shutdown, but wasn’t stopped by it) has been a boon to others.
Let’s take a look at three winners and three losers since the shutdown began last Tuesday.
Winner: H&R Block
Return Since Shutdown: +6%
H&R Block (HRB) has been a winner for most of the year, boasting 50% gains since Jan. 1. This fall, though, the stock began to show some weakness, declining around 15% during August and September.
That downward trend reversed on Oct. 1 as Morgan Stanley analyst Thomas Allen upgraded HRB from “equalweight” to “overweight” and upped his price target from $25 to $33. The new target translates to 17% upside on top of its already blistering run — and the upgrade has already sent the stock 6% of the way there.
The reason for Allen’s bullishness is simple: Obamacare. See, H&R Block signed a deal with online insurance company GoHealth recently, which will allow the company’s customers to buy health insurance online.
According to Allen, the new federal mandate combined with the fact that H&R Block is already the nation’s biggest U.S. tax preparer creates a “significant opportunity” for this new program to take off.
Winner: Constellation Brands
Return Since Shutdown: +7%
Constellation Brands (STZ) has been another sizzling stock since the shutdown began nearly a week ago — whether you believe it’s because furloughed workers have be drinking away their sorrows, or because the company posted stellar second-quarter results Oct. 3 is your call.
Narrowing in on the latter theory, though, Constellation’s newly acquired Crown Imports business helped STZ post doubled sales and a 35% year-over-year improvement in net income for Q2 — good enough for an easy earnings beat. That was the third time out of the past four quarters than the beverage giant beat expectations.
The strong results also caused Goldman Sachs analyst Judy Hong to reiterate her “buy” rating on STZ and raise the price target from $65 to $75. That translates to more than 20% upside for a stock that already has soared nearly 75% year-to-date.
Winner: Tenet Healthcare
Return Since Shutdown: +13%
Finally, Tenet Healthcare (THC) has been an even bigger winner since the shutdown — and Obamacare — began.
The main driver for Tenet’s recent double-digit gains is simple: Tenet finalized its $4.3 billion purchase of Vanguard Health Systems on the first day of the nation’s new fiscal year. THC shares climbed more than 6% on that day alone, then continued climbing after Fitch called the deal “strategically sound.”
Not only does the Vanguard purchase double Tenet’s market in Texas — an obvious advantage — but such size is especially important in the face of the new healthcare law. As Fitch put it:
“The strategic rationale for consolidation in the hospital industry is encouraged by reforms favoring larger, integrated systems of care delivery, including the Affordable Care Act.”
On top of that, the new healthcare expansion is also good for Tenet since it’s expected to boost earnings for hospitals, considering fewer patients will be uninsured.
Loser: Lockheed Martin
Return Since Shutdown: -4%
It’s hardly surprising that the shutdown has weighed on Lockheed Martin (LMT), considering it’s the world’s largest defense contractor by revenue. Since the budget battle remained unresolved on Oct.1, investors have backed out of LMT stock to the tune of 4% losses.
That total comes despite the fact that Lockheed bounced back slightly Monday, too. Since the Pentagon recalled its staff over the weekend, Lockheed trimmed the number of furloughed workers — but only from 3,000 to 2,400.
Still, Lockheed Martin has still been a winner for investors looking longer term. So far in 2013, LMT stock is nearly doubling the broader market’s climb.