One of President Trump’s most notorious campaign promises was his pledge to do away with the Affordable Care Act and replace it with something else. The Obama administration’s healthcare reform efforts were a divisive issue during the election, but now that Trump is in office, it looks likely that Obamacare will be at least partially dismantled.
Whether you believe Trump’s plans for the Affordable Care Act are good for the public, one thing is for sure — the industry will see a significant shakeup. That means picking healthcare stocks that can weather the storm, or even prosper from it, is paramount.
While there are no certainties when it comes to stock picking, Varian Medical Systems, Inc. (NYSE:VAR), UnitedHealth Group Inc (NYSE:UNH) and HealthEquity Inc (NASDAQ:HQY) are all worthwhile healthcare stocks to buy ahead of Obamacare’s replacement because their position in the industry makes them well suited to prosper once the healthcare exchange is eliminated.
Here’s what you need to know about each.
Healthcare Stocks to Buy: Healthequity Inc (HQY)
Over the last year, HQY has seen its share price rise more than 85%, which may not make it seem like a great buy. However, Healthequity is unique in that it was able to thrive under Obamacare, but it is also well positioned in the event of a policy change.
HQY is a good play for investors who are expecting the repeal and replacement of Obamacare because the company offers health savings accounts, which many believe will play a large role in eventually replacing the current health insurance exchange.
House Republicans have proposed nearly doubling HSA contribution limits and making HSA rules much more flexible under the American Health Care Act. This focus on making HSA’s more accessible is great news for HQY and will likely help the firm grow its business.
There’s no question that HQY is a relatively expensive stock with a price-to-earnings ratio of 98, but after a 7.36% slide in February shares have become significantly less expensive. Now is a good time to add HQY to your portfolio because the stock is likely to see a pop once Trump’s healthcare plans take shape.
Healthcare Stocks to Buy: Varian Medical Systems, Inc. (VAR)
When Trump took office, investors began to look more critically at healthcare stocks. No more Obamacare likely means fewer hospital patients as the system gave roughly 20 million otherwise uninsured Americans access to medical care.
The repeal and replacement of the ACA could therefore be detrimental to hospitals and the medical device makers that supply them. Lumped into this category is Varian Medical Systems, a device maker.
Due to these worries, VAR has made its way 6.6% lower over the past six months. However, the market’s concern about Varian is overdone, especially considering that VAR earns more than half of its revenue overseas and probably won’t feel the effects of Trump’s plans to repeal and replace Obamacare.
Investors who pick up VAR now will benefit from the market’s worries about device makers and get a solid healthcare stock for a bargain price.
Healthcare Stocks to Buy: UnitedHealth Group Inc (UNH)
The first company that comes to mind when talking about the end of Obamacare is most certainly UnitedHealth.
Back in 2015, UNH started complaining about the negative effects that the new healthcare exchange was having on its business. The company even warned that it would exit the exchange come 2017 if things didn’t improve.
Fast-forward to 2017 and UNH is probably celebrating the end of Obamacare. However, the positives for UnitedHealth don’t end there: The firm also stands to gain quite a bit from the Trump administration’s looser regulations. As America’s largest insurer, UNH would benefit supremely from Trump getting rid of regulations that prevent insurers from doing business across state lines.
As healthcare stocks poised to gain from the demise of Obamacare go, UNH is a pretty solid bet. Not only is the firm about to be relieved of the added costs that Obamacare shifted onto its business, but UnitedHealth will also likely see new growth opportunities spring up during Trump’s tenure.
As of this writing, Laura Hoy did not hold a position in any of the aforementioned securities.