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Michael Yoshikami
President & Chief Investment Strategist
YCMNET Advisors
Well it's happening.
It appears that Washington is about to enact sweeping legislation that will be the greatest shift in public policy in decades.
Yes, we can bemoan the lack of a completely private enterprise driven system but the reality is Big Brother is here and he's not going away.
Without a doubt there will be implications for investors that need to be considered; and it's not all bad news from an investment perspective.
Sweeping Health Care Overhaul Bill Passes House
This is a social policy change that will result in many more Americans being covered by healthcare. This increases the pool of medical consumers significantly and will be a positive for well-run, cost-conscious medical companies. Efficient diagnostic firms such as Quest Diagnostic [DGX
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]and Lab Corp of America [LH
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]will likely see higher service utilization rates.
Pharmaceutical companies have the potential to benefit from increased prescription volume (though cost controls may be significant).
Abbott [ABT
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]is poised to capture share market despite the new healthcare landscape.
And let's not forget that increased government involvement will mean higher levels of government bureaucracy. Look for medical records companies that will benefit as paper disappears and electronic data becomes reality.
The jury is out with regards to the impact on economic growth in the United States. It appears as if taxes will be rising for those making over certain income thresholds and history has shown that tax increases don't stimulate the economy but mute it.
While it is possible that the negative of higher taxes will be offset by the increased economic churn from increased healthcare utilization, a safer assumption is that economic growth will be negatively impacted.
So invest in cash flow strong companies that can prosper in a slower growth environment. Johnson and Johnson [JNJ
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]and Proctor and Gamble [PG
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]are companies that sell products less discretionary in nature and generate earnings that are less sensitive to economic cycles.
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And don't forget about the potential for greater deficits despite promises to the contrary. The current estimates from proponents are that health care reform will ultimately be a revenue neutral policy; that would be great but unexpected news.
If promises vaporize (the government is not known for revenue neutral policies), there is risk that exploding deficits will be exacerbated. Don't forget to invest with inflation in mind; commodities make sense as a hedge.
To ignore environmental shifts carries peril as you invest. Adjust your portfolio for the new world of healthcare in the United States.
Like it or not, change is coming.
Editor's Note: Disclosure - Yoshikami does not personally own any of the above recommended stocks.
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Michael A. Yoshikami, Ph.D., CFP®, is Founder, President, and Chief Investment Strategist of YCMNET Advisors, Inc., a registered investment advisory firm (www.ycmnet.com). He oversees all investment and research activities of YCMNET. He is a respected lecturer speaking frequently on market issues, tactical asset allocation, and investment strategy. Michael and YCMNET were ranked as one of the top investment 100 advisors in the United States for 2009 by Barrons. He appears regularly on CNBC and CNBC Asia and can be reached directly at .
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