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Are Healthcare Stocks Safe?

On Monday President Obama named Kansas Governor Kathleen Sebelius to lead his ambitious health reform effort, kicking off a week focused on revamping an inefficient healthcare system whose cost he fears is hurting the U.S. economy.

As you might remember some of Obama’s reforms include providing insurance to those who don’t currently have coverage, making it easier for people to get generic drugs, and streamlining medical records.

As a result investors pummeled a wide range of companies in the healthcare space – everything from Merck to UnitedHealthcare -- reasoning that the new rules would strangle profits.

But why is that?

CNBC’s Mike Huckman explains that “the President is proposing that there be greater rebates to Medicaid on the popular drugs that Medicaid purchases. That brings down margins for Big Pharama."

Drug Stocks Take Hit

"Also," he says, "the President is trying to create a road map for generic versions of biotech drugs. That’s what’s pressuring Biotech."

What’s the trade?

Keep an eye on Genenech , counsels Huckman. If you're willing to take a risk on data, the results on Avastin are due soon. If they're strong the stock could go to $100 and maybe even put it out of Roche’s reach in their acquisition attempt.

And also keep an eye on Dendreon, for their results on prostate cancer, he counsels.

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Trader disclosure: On Mar. 2nd, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour Owns (AAPL), (EEM), (BAC), (FXI); Seymour's Firm Owns (FCX); Terranova Owns (DIS), (FXC), (XBI), (BRCM), (WYNN), (INTC), (DELL), (JOYG); Terranova Owns (AMGN) & (AMGN) Puts; Terranova Owns (IBM) Call Spread; Terranova Owns (COP) Calls; Terranova Owns MACI Oil Futures; Macke Owns (MS), (GS), (SDS), (TM), (AAPL), (WOS); Karabell Owns (AAPL), (FCX), (GOOG), (GLD), (GE), (JPM) with wires