Market Overview

Trading the Supreme Court's Obamacare Decision


The U.S. Supreme Court may hand down its decision on the constitutionality of The Patient Protection and Affordable Care Act (popularly known as Obamacare) sometime Monday morning. If that is the case, traders may anticipate some volatility in healthcare stocks. Last Friday, Benzinga outlined how to trade the Obamacare ruling.

Overall, the entire healthcare sector could rally as a result of this overhang being removed, no matter which way the decision goes. A number of stocks and sectors, however, may do better than others. If Obamacare is ruled unconstitutional it may have an adverse effect on large HMO companies. Stocks to watch include Centene (NYSE: CNC), Amerigroup (NYSE: AGP), and Molina Healthcare (NYSE: MOH). Hospital stocks could also be hurt if the legislation is overruled. These would include Tenet Healthcare (NYSE: THC), HCA Holdings (NYSE: HCA), Health Management Associates (NYSE:AMA) Community Health Systems (NYSE: CYH), and Vanguard Health Systems (NYSE: VHS).

There are also quite a few names that could benefit if Obamacare is struck down. These might include staffing companies such as Manpower (NYSE: MAN) and Kelly Services (NASDAQ: KELYA). Other names that are poised to gain from this outcome include major insurers such as Aetna (NYSE: AET), Cigna (NYSE: CI), and Coventry Health Care (NYSE: CVH). These companies would not benefit significantly from the legislation, but would be hurt by cumbersome rules and regulations.

The other segment of stocks that market participants are pointing to as potential beneficiaries of a decision against Obamacare are medical device makers. The Patient Protection and Affordable Care Act calls for an excise tax of 2.3% on total medical device revenue by 2013. This tax is designed to pay for expanded Medicaid coverage under the legislation. Among the names that could rally if this headwind was removed are Intuitive Surgical (NASDAQ: ISRG), Medtronic (NYSE: MDT), and Boston Scientific (NYSE: BSX) - among others.

Posted-In: News Events Global Economics


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