Surprise: Reform hurts health care stocks

We're beginning to see the hits these companies are going to take, and it's brutal.

By Jim Cramer Apr 22, 2010 7:03AM
Jim Cramer

 

By Jim Cramer, TheStreet

 

You mean health care reform is bad for health care stocks? You mean that they get hurt by it? You mean people will sell them because of it?

 

That's what I am hearing all over the health care world this week. This is revelation time.


We got all comfortable thinking that there were nothing but winners in the health care world. Instead, we start hearing from everyone that numbers are too high because of the reforms. Abbott (ABT) said that Wednesday and we heard it definitively from Lilly (LLY) on Monday -- 35 cents worth of definitive -- and that's just plain nasty.


And if you blow the numbers away, like UnitedHealth (UNH) did yesterday, it just gets worse. Given the leeway the secretary of Health and Human Services has to lord over this group, it would have been a terrific time for UnitedHealth to blow the quarter. In the end, they made so much money they couldn't hide it. Post continues after video:

Look, the cards appear to be stacked against health care anyway. How horrible was Gilead (GILD) Wednesday? It was OK. But a 10% haircut is what happens when you don't blow out the numbers in this suddenly despised group.

 

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The group would have languished if only because of the rotation going on as people figure out that it is better to be levered to the hottest business cycles -- consider the Boeing (BA) and Boeing-related stocks (mentioned earlier as a buy when BA was lower). But number cuts? And number cuts that nobody apparently was factoring in?

 

Just plain dreadful.

 At the time of publication, Cramer had no positions in the stocks mentioned.

 

Jim Cramer is co-founder and chairman of TheStreet. He contributes daily market commentary for TheStreet's sites and serves as an adviser to the company's CEO.

 

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