Will Obamacare be good for stocks?

The Supreme Court has given the thumbs up to the Affordable Care Act. Now investors wonder what's next.

By Anthony Mirhaydari Jun 28, 2012 2:30PM

Image: United States Supreme Court (© Hisham F Ibrahim/Photodisc Red/Getty Images)The deed's been done. The highest court in the land has given its approval to President Barack Obama's health care reform legislation and its controversial insurance mandate. The justices held the mandate constitutional as a tax but not as a penalty. Same difference. If you don't play, you'll pay.


Stocks have sold off in response to the decision, which is seen as an expansion of the government's power, a precedent for increased regulation, and other broad-stroke negatives that are scaring away investors. But for health care stocks, according to Barclays Capital, the decision could actually be a boon to their bottom line.

 

The risk for insurance providers was that the Supreme Court would cut down the individual mandate but leave the other provisions of the law intact -- provisions that require them to accept people with preexisting conditions. The fact that it didn't, according Barclays' U.S. Managed Care analyst Joshua Raskin, should be worth a high-single-digit percentage move in names like Amerigroup (AGP), Molina (MOH) and Centene (CNC).

 

Why? It ensures a steady stream of new customers. These names are moving because of the court's favorable decision that the federal government can't cut a state's existing Medicaid funding if there is noncompliance with expansion provisions in the Affordable Care Act. Raskin notes that expansion in Medicare set for 2014 will bring 16 million to 20 million new patients into the system.

 

 

As for the rest of the market, we're mired in an ever-tightening trading range, as shown in the chart above. All eyes remain on the eurozone summit.

 

 

While the overall market is a bit of a snoozer, there is plenty of excitement just beneath the surface. Just look at action in weight-loss-drug maker Orexigen Therapeutics (OREX). Shares have surged in response to the Food and Drug Administration's first approval of a weight-control medication in more than a decade. Orexigen is working on a medication called Contrave, with a targeted 2014 release.

 

I recommended OREX to my subscribers on June 13. The position is now up more than 50%.



Check out Anthony's investment advisory service The Edge. A two-week free trial has been extended to MSN Money readers. Click here to sign up. Contact Anthony at anthony@edgeletter.c​om and follow him on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.

26Comments
Jun 28, 2012 2:57PM
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Will Obamacare be good for stocks?

 

Obviously not

Jun 28, 2012 4:02PM
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Hey Hanks..........GM, Chrysler, Nebraska (Cornhusker Kick-Back) and Harry Reid's friends all got exemptions from participation in ObamaCare..............Oh yea, so did the President and his family....and Congress.....imagine that.............and the fact that the President and Congress are all exempt from Social Security and Medicare.........imagine that..........those defunct programs are O.K. for you and me and all our liberal friends......but not for Obama or Congress........imagine that!
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If corporations were not already running with as few a people as they can to stay functional, you can certainly guarantee that IF there is still any slack, they will add to the high unemployment numbers even more now!

GM and Chrysler will be needing a new Cash for Clunkers/ Volt handout.

This will also make any chance Oduffus had at reelection drop in probability dramatically.

The other side is that many employers are going to force an enormous weight on this bill by immediately removing all employees from their insurance policies and WHEN, NOT IF, the estimates for the costs of Oblamocare explode to 2.5-4x what the GAO guessed them at (since no one has ever had all the specifics to make estimates) and unemployment rises as the NEW RECESSION gets underway it will have to be far more borrowing or cutting back, and since Obuttboy, hasn't a clue how to cut back on anything ............ big troubles for all American except politicians! 

Jun 28, 2012 4:09PM
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Does American need a healthcare overhaul? ABSOLUTELY!  Is Obamacare the answer? Lord, no! This is one of the most poorly written, chaotic pieces of crap to be passed by our Congress!  This monstrosity will bankrupt this country. We need to contact our representatives and insist that they repeal this dog!
Jun 28, 2012 3:04PM
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I'm a seller, this should push us into a entitlement state depression...
Jun 28, 2012 4:20PM
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The supreme court just inched the USA closer to what is wrong with Europe. Obama will crow until November thinking he got a win when he just added more debt and bad law to this country. I hope people realize how much control by the government has gained since Obama has been in office and vote him out in November. Four more years of Obama and the freedoms we have enjoyed in this country will be gone.
Jun 28, 2012 3:59PM
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The only "positive" taxes that I can think of are some types of consumption taxes.  Positive in that if people are able to afford to purchase these - it means these is excess money to do so.  Especially those of goods that are truly optional.  Not gasoline, food, etc.  Any mandated tax that is enforced with further fiscal penalties is not good for anyone (except the government).    Maybe, some types of collection agencies that are subcontracted to enforce the paying of taxes.  Other than that, it is a ridiculous notion.

Jun 28, 2012 4:42PM
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The socialists can enjoy their victory over the next 4 months. All of these anarchists will be voted out in November.  Over 60% of Americans wanted Obamacare overturned, this Supreme Corp ruling will just stimulate the believers in the Constitution and create the largest voter turnout in history to vote out the toxic corrupt poltiticians in Washington. Then America will experience real change and not be lied to. 
Jun 28, 2012 4:58PM
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What was the Supreme Court THINKING??? One more hit against the middle class in particular....did anyone really READ through this plan??? I thought that the US was a democracy.....
Jun 28, 2012 7:23PM
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I like Presidents Romney's first order, to EXEMPT all companies and individuals from Obamacare.  A veryeasy out.  Instead of just t=your 3,000 odd campaign contributors exmepted, everyone will be.

 

That should work just fine.... 

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“Obama Has Been The Best President For The Stock Market” .. and the worst president for the middle class ever….

Look, rich people get wealthy because they are astute at following the flow of money. The more money flows, the better the chances to tap into that flow, invest and get rich. President Obama and his push to flow money through the economy by creating huge deficits to be paid by future generations is the best thing that could happen to the market and wealthy investors. At the same time it is the worst thing that can happen to future generations and the middle class that will have to pay for it by higher taxes.
So yeah, Obama is great for rich people, not such for the middle class and poor people still looking for jobs.

Jun 28, 2012 3:18PM
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no the stockmarket took a dive now , when the rest of the word gets out  its going to be worse than the depression of 1929 , this time no jobs for any one , an the run on the banks , because in one part is that the government as actcess to your money in the bank  they can take what everthey want from you at any time , so that means  no banks everyone  will want to be paid in cash now an no more bank actt s or checking accts  an no banks  no money no loans , no interest  no fees  but fines , what if you can not find a job or you lose a job how in the heck are you going to pay ????? , first you rent , second bills have to be paid , third food has to be bought , if you own a car new or used , you can not aford it  so you an your family out on the streets or may be you will be in jail for health care law  so either way the government  pays it or at least  you get three meals a day an a roof over your head ???  , its time to move to mexico !!!!
Jun 28, 2012 3:06PM
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well they are voting the current congress out as well as the president an the ruling will be overturned i guess when people start living in the streets an have no home more so than now , its not the cost alone they took are right away from us , the money will come from all the cuts thats going to be made when the u.s. stops giving money overseas ,
Jun 28, 2012 3:53PM
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ok look. corporations DON'T MATTER! They do not employ the number of people you think they do. Inform yourself!

 

...not to mention, um, gosh... THEY ALREADY PROVIDE INSURANCE.

 

Stop the mindless blather and regurgitated horsesh!t. It stinks.

Jun 28, 2012 5:43PM
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If only the sheeple would realize corporate tit healthcare is  a way of control! Most sheeple bark ( or should I say Baaa) about this but have never been off the company tit...It's all you know! Educate yourself!
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