The fearmongers are having a field day with the notion of the
Affordable Care Act (also known as Obamacare) being
These fears have become so strong that Obamacare's opponents
have effectively shut down the U.S. government since the majority
of the law took effect Oct. 1.
The purpose of this article isn't to argue for or against
Obamacare. It isn't perfect, and it will likely undergo a
difficult evolution before being fully implemented. However, in
contrast to the political posturing going on in Washington, a
group of investors have been booking substantial profits over the
past year due to the implementation of the new law.
While some of these profitable avenues are obvious, others
remain under the radar of all but the most sophisticated
Obvious names such as hospital operators like
Community Health Systems (NYSE:
HCA Holdings (NYSE:
have seen their shares advance by nearly 50% over the past 52
weeks. In addition, the
Health Care Sector Select SPDR (NYSE:
exchange-traded fund (
) is nearly 30% higher during the past 10 months.
One of the main reasons for the outperformance of health care
and hospital stocks is the fact that revenues will increase for
these businesses under Obamacare. More insured people mean more
paying clients for health care facilities, hence greater profits.
Investors who anticipated this change have booked profits, and
there is substantial upside to come in health care-related
One relatively unknown industry that is benefiting in a big
way from Obamacare is benefits administration. Benefits
administration companies are hired by corporations to manage
their employee benefits. All the changes triggered by Obamacare
provide this sector with substantial profit-making opportunities
-- not to mention the fact that all the newly insured will
require more companies to outsource their benefits
The leading firm in this sector is
, a nearly $2 billion provider of benefits management services
for corporations. Shares have rocketed nearly 300% since
It is estimated there will be 40 million active employees in
Obamacare health exchanges by 2018. WageWorks has just more than
2 million clients, representing about 10% of the current market.
WageWorks' services are used by 50% of Fortune 100 corporations
and more than 35% of the Fortune 500 names.
Another way WageWorks is growing is by rolling up smaller
benefits-management companies under its umbrella. This goal of
this acquisition strategy is to obtain one to three smaller
companies a year. These purchases result in WageWorks quickly
ramping up its client base, hence revenues. It supercharges an
already Obamacare-fueled growth path.
It's far from too late to benefit from WageWorks' momentum. In
fact, this is the perfect time to buy. Shares have pulled back
from highs close to $57 to near the 50-day simple moving average
in the $46 range. Shares have consequently bounced higher,
setting up an ideal technical buy situation. Look for shares in
the technical value buy zone of $47 to $50.
Risks to Consider:
WageWorks trades at a high multiple of expected 2014
estimated earnings, so it's far from an inexpensive stock.
However, the expected growth path is steep, which will likely
mitigate this fact. In addition, unforeseen changes in the
Obamacare legislation could hamper the expected growth path. All
stock investing involves risk. Always use stop-loss orders and
diversify when investing.
Action to Take -->
Buying now in the technical value buy zone makes good sense.
Stops should be at $45 with a 12-month profit target of $65.