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2 Scenarios for Healthcare Stocks After Election Day

Their fortunes will depend greatly on which candidate wins


Romney Win

Republicans would need to take seven of the nine tossup races (Vice President Paul Ryan would be the tie-breaker) to win the Senate. That’s extremely unlikely, considering the GOP is at risk of losing the Indiana Senate seat Richard Lugar won with more than 87% of the vote in 2006. (Lugar lost his primary battle to Tea Party pick Richard Mourdock).

Still, if everything goes Romney’s way, the GOP would gain control of the White House and both chambers of Congress.

Bain Capital’s ‘Leveraged Gambling’
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Stocks that will benefit:

Big Pharma’s big tax burden under Obamacare likely will be delayed and/or whittled down significantly. Drug manufacturers also are likely will benefit from Romney’s pledge to rein in the Food & Drug Administration (FDA), which he believes stifles innovation. That strengthens stocks like Pfizer (NYSE:PFE), Eli Lilly (NYSE:LLY), Merck (NYSE:MRK), Abbott Laboratories (NYSE:ABT) and AstraZeneca (NYSE:AZN) because it’ll become easier for them to gain new drug approvals.

Medical device companies could win a reprieve from the ACA’s 2.3% excise tax on everything from artificial knees and pacemakers to surgical gloves and imaging devices, scheduled to hit in 2013. That would be good news for Medtronic (NYSE:MDT), St. Jude Medical (NYSE:STJ), Covidien (NYSE:COV), Johnson & Johnson (NYSE:JNJ) and Boston Scientifics (NYSE:BSX).

Insurance companies like UnitedHealth Group (NYSE:UNH), Cigna (NYSE:CI), Aetna (NYSE: AET) and WellPoint (NYSE:WLP) should also win because taxes will be lower. If Romney’s post-repeal “replacement” still requires consumers to purchase health insurance (as he proposes) that’s another win. Romney also favors allowing carriers to compete for business across state lines.

Stocks that will suffer:

If Romney grants ACA waivers to all 50 states and allows them to use Medicaid funds at their discretion, hospital stocks will be stressed. That’s particularly true for Medicaid-reliant companies like Molina Healthcare (NYSE:MOH), Centene (NYSE:CNC) and Amerigroup (NYSE:AGP).

Romney’s tort reform proposals, which limit malpractice awards, eventually could relieve pressure for hospitals. But in the near term, chains like HCA Holdings (NYSE:HCA), Health Management Associates (NYSE:HMA), LifePoint Hospitals (NYSE:LPNT), Universal Health Services (NYSE:UHS) and Tenet Healthcare (NYSE:TNT) could face near-term headwinds, too.

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