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2 Scenarios for Healthcare Stocks After Election Day

Their fortunes will depend greatly on which candidate wins


Obama Wins 

In Obama’s best-case scenario, he wins, and the Democrats hold Wisconsin, Virginia, Montana, North Dakota, and retiring Independent Sen. Joe Lieberman’s Connecticut seat, while picking up low-hanging fruit in Massachusetts and Nevada. That makes a total of 50 votes with Vice President Joe Biden as the tie-breaker.

Some stocks would be better buys under this scenario, although most of the impact of Obamacare has been priced in already.

Bain Capital’s ‘Leveraged Gambling’
Bain Capital’s ‘Leveraged Gambling’

Stocks that will benefit:

Health information companies could be breakout performers if there’s no delay in implementing the state exchanges under Obamacare. States, providers and payers will be scrambling not only to invest in new healthcare IT — particularly cloud-based services — but they’ll also need expert professional services to ensure that the data transmission is interoperable and secure. Cerner (NASDAQ:CERN), McKesson (NYSE:MCK) and Quality Systems (NASDAQ:QSII) are very good bets in this scenario.

Hospitals like those mentioned above will fare better overall because the universal mandate gives them the ability to stem the cost of uncompensated care. They also could benefit if congressional Republicans make a strong push for tort reform.

Insurers seem to benefit either way  — with lower taxes and interstate competition under Romney or 30 million potential new customers under Obama.

Stocks that will suffer:

Nursing homes and home health providers like Lincare Holdings (NASDAQ:LNCR), Gentiva Health Services (NASDAQ:GTIV), Amedisys (NASDAQ:AMED) and Almost Family (NASDAQ:AFAM) still face $40 billion in Medicare reimbursement cuts over the next decade. They’ll also likely take some sort of hit from the ACA’s projected $716 billion in Medicare cuts over the next decade, since the cuts certainly won’t be limited to waste and fraud. Expect facilities with heavy exposure to this sector to experience headwinds.

Since the Supreme Court also struck down the Medicaid expansion, stocks like Sun Healthcare (NASDAQ:SUNH), Skilled Healthcare (NYSE:SKH) and Kindred Healthcare (NYSE:KND) — could face the double whammy of Medicare and Medicaid cuts.

Device manufacturers (and tanning salons) still face that onerous excise tax under Obamacare, but the downside largely has been priced in.

As of this writing, Susan Aluise didn’t own any securities mentioned here.

The opinions contained in this column are solely those of the writer.

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