Health and Science

Analyst on the hospital stocks' three-day rally as GOP health-care bill gets postponed

The health-care stocks making moves before the GOP vote
The health-care stocks making moves before the GOP vote

Hospital stocks continue their three-day rally as the GOP health-care bill got postponed for the second time on Friday.

Analyst Jason Gurda from Keybanc says he believes a "no vote" for the health-care bill is the best outcome for investors in the hospital sector.

"But certainly the bill that they're voting on in the House today would be very negative for the hospital industry. It eliminates coverage for 24 million people," Gurda told CNBC's "Power Lunch" on Friday. "At the same time, it does not eliminate the Medicare rate cuts that the hospital industry had given when Obamacare was passed."

However, major insurance stocks are all trading down, leading investors to wonder whether sticking with hospital managed-care stocks would be the best investing strategy for investors.

"Within the hospital group, there's select opportunities. You do have to be aware, as I mentioned earlier with some of these companies, there's high levels of debt," Gurda said. "So the two that we are recommending have moderate levels of debt as well as, in the case of HCA, fairly stable volumes and in the case of UHS, very strong volumes."

Wall Street has been closely monitoring the passage of the GOP health-care bill, with some worried that tax reform could be in danger if the American Health Care Act isn't passed. As a result, stocks overall rallied after the news of the health-care bill being pulled.

Shares of major hospital stocks such as Tenet, HCA, and Lifepoint all rose at least 3 percent on Friday as investors anxiously waited for news on the health-care bill vote. Hospital stock, Community Health Systems, surged nearly 10 percent during intra-day trading.

Meanwhile, insurers such as Molina and Centene, which are associated with managed-care and Medicare and Medicaid services, experienced their best days since November of last year and February, respectively. But other insurers such as Cigna and Anthem saw their shares dipping more than 2 percent awaiting the news.