A vote for Mitt Romney this November is a small victory for healthcare stocks.
The economy is at the forefront of the upcoming presidential election. But the issue of healthcare is next in line.
The Supreme Court’s ruling back in June to uphold President Obama’s sweeping healthcare reform – commonly known as ObamaCare and intended to create affordable, universal healthcare for all Americans –was bad news for certain healthcare companies.
Obama’s Patient Protection and Affordable Care Act would, among other things, impose a 2.3% excise tax on the sale of medical devices starting next year and charge pharmaceutical companies $84.8 billion in fees over the next 10 years.
Neither measure would be good for business at the affected healthcare companies. Both provisions would cut into those companies’ profits in the coming years.
So what’s the best healthcare companies can hope for in the coming months? That Mitt Romney wins the election.
If Barack Obama is no longer president, then ObamaCare could be overturned. Romney would need a majority vote in the Senate to repeal the law, of course – something that is no guarantee given that Republicans currently occupy only 47 of the 100 seats.
But nothing would change if Obama wins re-election. And shares of the healthcare companies impacted most by ObamaCare would likely take a major hit.
Conversely, if Romney wins the election – and according to the latest Gallup poll, the two candidates are in a virtual dead heat – then the tide would suddenly turn in favor of those healthcare stocks.
With the presidential election less than three months away now, here are four healthcare stocks that stand to benefit most from a Romney win:
- Pfizer (NYSE: PFE): The largest pharmaceutical company in the U.S. stands to absorb the biggest hit once ObamaCare takes effect. The fees Pfizer would have to pay to cover the Medicare “donut hole” by 2020 would cut into the company’s margins, and likely force it to raise prices on industry-leading drugs such as Lipitor, Celebrex and Viagra. That won’t be good for sales, and could result in a pullback for a stock that has risen nearly 50% over the past two years.
- Boston Scientific (NYSE: BSX): One of the world’s leading medical-device makers is just a few months away from being slapped with the 2.3% tax ObamaCare would impose. Considering the company just suffered a $3.5 billion loss in its most recent quarter and has turned a profit only once in the last three years, the extra tax could be catastrophic for a stock that’s already clinging to life.
- Stryker (NYSE: SYK): Shares of this large-cap medical-device maker are already feeling the brunt of the impending excise tax. Since the Supreme Court upheld ObamaCare on June 28, the stock has already tumbled 2.2%. Stryker’s profits have declined in each of the last two quarters, trimming its margins from 18.1% in December to 15.4% currently. The Obama tax could threaten to make those margins even slimmer – something that is likely to scare a few investors off.
- WellPoint (NYSE: WLP): Neither the excise tax nor the pharmaceutical company fees directly impact WellPoint. But shares of this private-sector health insurer have fallen off a cliff since the Supreme Court ruling. The stock is down 18% since June 27, trading at a 52-week low until recently. Why the sharp drop? Because WellPoint’s slim profit margin of just 4% could be reduced even further by the strict rate regulations ObamaCare would impose. On the bright side, it seems that investors already began selling off WellPoint shares after the Supreme Court ruling – reducing the price to less than eight times earnings.
So should Obama no longer be in office come November, WellPoint shares – like the three other stocks mentioned above – would suddenly have a lot to gain.
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