House Democrats are pushing to pass the health care bill that would simultaneously deliver on Obama's promise to expand coverage while ostensibly slashing the deficit, a strategy aimed at winning over the party's fiscal conservatives. Which stocks and sectors actually stand to benefit from the bill?
Les Funtleyder, health care strategist at Miller Tabak, Jason Gurda, managed care analyst at Leerink Swann and Ralph Giacobbe, analyst at Credit Suisse First Boston offered their sector insights and investment recommendations.
“If the bill passes, 33 million more people get insured and there’s limited price pressure on drugs, so we like it,” Funtleyder told CNBC.
“If the bill doesn’t pass, it’s less positive, but uncertainty goes away and you still get a multiple point or two of upside.”
Funtleyder has a “buy” rating on Merck .
He added there is nothing in the health care bill that refers to drug prices.
“They even got rid of pay-for-delay—it explains why pharmas are spending millions a day lobbying for reform,” he said. “They like reform.”
“We like the group either way,” said Gurda of the insurance sector. “The health care bill is a slight negative for the group...but they’ll be okay with it…They will benefit also from any increase in employment that we might see this year.”
Additionally, Gurda said the overall fundamentals of the insurance companies' businesses are stabilizing from last year. He has "buy" ratings on Wellpoint and Cigna .
“Unfortunately, there’s not a lot within the health care bill that will reduce the cost of health care and insurance for the average person, so [those] prices will continue to go up,” he added.
“More coverage for the uninsured is a clear positive for hospitals," said Giacobbe. "It’s hard to think of it as a negative for the hospital stocks.”
Giacobbe likes Health Management , Community Health Systems and Universal Health Services.
“I wouldn’t take the approach that this is going to be a windfall for the hospitals, but just an incremental positive on the visibility of the model,” he noted.
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Funtleyder does not own shares of NVS, MRK or BMY.
Giaccobe has investment banking clients who own shares of CYH, HMA and UHS. Additionally, Credit Suisse expects to receive or intends to seek investment banking related compensation from CYH, HMA and UHS within the next three months.
No immediate information was available for Gurda or his firm.