Leading up to and immediately following the Obamacare Supreme
Court decision, most health care stocks and funds were in focus.
Companies and ETFs in this space saw outsized trading volumes as a
result, while many slumped as soon as the final decision was
Most of the health care firms have since rebounded with many
segments of the important industry seeing their stocks rise by a
few percentage points over the past week. However, one corner of
the industry has stuck out as a big loser, unable to recoup its
losses after the announcement; health care plans/HMOs (read
Health Care ETFs in Focus On Obamacare Supreme
Overall, this has easily been the worst performing segment over
the past week in the broad health care space as all of the biggest
companies in the industry are in the red. This is in sharp contrast
to the pharma, biotech, and medical device/instrument firms, which
have all managed to start July on a strong note.
This trend is especially puzzling because of what the Obamacare
ruling could do for the HMO space. Many analysts believe that the
controversial individual mandate would be a boon for HMO providers
as it would add millions to their rolls, with many being very
healthy and younger individuals.
Seemingly, investors have instead focused in on the fact that
children will get to stay on the parent's plans and the new
stipulations regarding a lack of lifetime care caps and rules
regarding pre-existing conditions. These changes could potentially
cancel out any benefits from the millions of fresh new clients and
could possibly be the reason for health care plan companies' slump
after the Supreme Court decision.
Thanks to this negative sentiment, all six of the health care
plan providers in the S&P 500 are down significantly over the
past week. This includes a near 11.6% loss for
, 7.6% slump for
, a 7.1% slide in
Coventry Health Care (
, and a nearly 6% loss for the biggest of the bunch,
UnitedHealth Care (
To me, this seems a bit overdone, particularly considering the
solid performances that investors have seen in the rest of the
health care space. After all, over the past week, the
Health Care Select Sector SPDR (
is actually up about 1%, demonstrating that the 'sickness' in
health care stocks is pretty much only afflicting health care
plans/HMOs at this time (see
The Five Best ETFs over the Past Five Years
Another factor to consider for the HMO space is the
current Zacks Industry Rank
. At time of writing, the HMO segment was currently
ranked-admittedly in a rather large tie-for 106 out of 265 from
this metric. This includes
a few firms that are Ranked 2
or 'Buy' while it should also be noted that the segment has surged
by about 50 places in the past week, suggesting that the underlying
fundamentals for the space aren't as bad as investors have
experienced over the past few days.
While it should be noted that all this could change as we
approach the summer earnings season, the space could still be an
intriguing choice for investors looking for a beaten down sector in
today's market environment.
What do you think? Is now the time to get in on health plan
providers/HMOs? Or should investors continue to hold out and put
their cash to work in other corners of the health care market?
Let us know what you think in the comments below!
AETNA INC-NEW (AET): Free Stock Analysis Report
COVENTRY HLTHCR (CVH): Free Stock Analysis
UNITEDHEALTH GP (UNH): Free Stock Analysis
WELLPOINT INC (WLP): Free Stock Analysis Report
SPDR-HLTH CR (XLV): ETF Research Reports
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