How You Can Invest and Profit From Obamacare

ObamacareObamacare is now a fact of life for Americans, as it is the law of the land.  Even though the gridlock in Congress surrounding Obamacare is reason for concern, most would argue that it’s here to stay.

Let’s ignore the politics here and realize the basics – an investor should always prudently look for opportunities.   For long term gains from Obamacare, there are wide variety of investing options, ranging from proven blue chips like Unitedhealth Group (NYSE: UNH) and WellPoint Inc. Group (NYSE: WLP), the two largest health insurers in the United States,  to promising small caps like Labor SMART (OTCBB: LTNC), a growing firm in the demand worker industry.

 

Profit From Large Health Insurance Companies and Hospitals

The stock performance of Unitedhealth Group and WellPoint Group this year have certainly evinced how each should fare well under Obamacare, in the view of Wall Street investors.  For 2013, Unitedhealth Group is up more than 30%.  Over the same period, WellPoint Group has soared by more than 50%.

The other major benefactor from Obamacare is hospitals.  Remember, hospitals are taking the biggest losses from uninsured patients because anyone can walk into an emergency room and get treatment – whether they can pay or not.  So, by broadening the base of insured individuals, hospitals should be making more profit.

Some key hospital players include: HCA Holdings (HCA), Universal Health Services (UHS), LifePoint Hospitals (LPNT), and Select Medical Holdings (SEM).

 

Don’t Forget the Pharmaceutical Companies

Obamacare will be pushing prescription drug prices down, which could spell trouble for drug developers like Abbott Labs (ABT) and Pfizer (PFE).  However, it will be a huge benefit for generic drug manufacturers and wholesale pharmaceutical companies.

McKesson Corporation (NYSE: MCK), is in the wholesale pharmaceutical group.  Insurers will be pushing for all cost reductions possible in Obamacare, especially in drugs due to the increasing demand from the aging populace in the United States.  That has certainly been reflected in the price performance of McKesson Corporation for 2013, as it has soared over 43%.  Earnings-per-share are projected to almost double for McKesson over the next year, from $5.82 to $9.32.

Pharmacy benefit managers will also benefit from this trend.  A key player in this space is Express Scripts Holdings (ESRX).

Motif Investing

 

Healthcare Staffing is Another Safe Bet

Labor SMART is another company that has seen its revenues soar, in part due to Obamacare.

As a result of Obamacare, employers are looking at much higher expenses per worker due to having to provide health insurance (that is why health insurance stocks have jumped).  From that, revenues for Labor SMART have soared since 2011.  Over that same period, the number of branches for Labor SMART has increased by more than 500%.  As pointed out in an article by Anna-Louise Jackson, Steve Mathews, and Anthony Feld in Bloomberg Finance, “Temporary Work Demand Rises as Companies Avoid Commitments: Jobs,” the number of workers needed at firms like Kelly Services (NASDAQ: KELYA) and other temp agencies has increased due to market demand, now almost $30 billion, for on-demand labor, both blue collar and executive.

Kelly Services is up almost 50% for 2013, showing the promise of temporary labor companies by its performance, too.

 

Electronic Medical Records

Finally, don’t forget electronic medical records.  With most healthcare companies looking to reduce costs, electronic medical records will finally start becoming the norm.  Most of the major hospital systems have already adopted it, and it will slowly start trickling out to every doctor’s office in the country.

The key players in the electronic medical records space include: Cerner Corporation (CERN), Athena Health (ATHN), and Computer Programs and Systems (CPSI).

 

Investing in Obamacare

It can seem daunting to build an investment strategy around Obamacare, so I wanted to highlight one of my new favorite investing strategies.  It’s called Motif Investing, and it was created by a company with the same name.  The premise is that you can invest in a “motif” or basket of 30 stocks that matches some sector or trend.  Motif Investing has created 113 different motifs, and they are adding new ones all the time.  For a single commission of $9.99, you can invest in an entire Motif, or 30 stocks in the sector you’re looking for.

In our case, we want to invest in stocks that will benefit from Obamacare.  Motif Investing has put together a motif that focuses on this exclusively.  You can find it here: Obamacare Motif.  What I love about Motif is that you can see the track record of your “motif”, and also see how it compares to major indexes like the S&P500.  For example, you can see that the Obamacare Motif has returned 29.6% since inception (it’s only 6 months old), and has outperformed the S&P500:

Obamacare Motif

 

 

No matter what anyone’s view of Obamacare, it is here until the spring of 2017, at the earliest.  That provides ample opportunities to profit from its provisions.  Some of these are obvious, such as with Unitedhealth and WellPoint.  Others are not so defined, but just as lucrative for investors, like those in the temporary service sector with Kelly Services and Labor SMART.  For those willing to invest for the long term and perform the necessary research, there are many opportunities for profits ahead from the full force of Obamacare.

What are your thoughts on investing in Obamacare and related stocks?

Motif Investing

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Comments

  1. says

    Interesting article and thoughts. Like anything else time will tell which sectors profit from these changes and for how long. I still advocate a diversified portfolio vs. trying to figure which individual stocks or sectors will out perform, call me boring if you will.

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