Do Pharma Stocks Already Reflect Reform?

With health care stocks higher on Monday and reform solidly through Congress, is everything all priced in?

According to CNBC’s Mike Huckman possibly not.

What must you know?

For about a year drug industry leaders had been saying they would make up in sales volume whatever they lost in price, Huckman explains.

But it doesn’t look like they’re going to lose much if anything in terms of pricing power. The new government legislation doesn’t attempt to control prices much at all.

Although the companies will pay tens of billions over several years as part of the new bill, drug companies could be looking at as many as 32 million new prescription drug customers which may more than offsett any new costs.

In other words it could be a net positive for the drug makers.

What’s the trade?

Big pharma have been underperforming the market and many analysts were calling for a sell-off in the space, says Mike Huckman. But that didn’t happen. With certainty in the space it seems to me that buyers are more comfortable.

I think the legislation benefits the generic names, says Pete Najarian. I’m bullish Mylan.

I’m also bullish Mylan, says Guy Adami. And elsewhere in the space I’d look at Medco and/or Express Scripts, says Guy Adami. I think they both have earnings power in the wake of reform.

As far as I can tell, the tape is telling me to get into these names, adds Joe Terranova. With uncertainty removed from the sector, I think we see money managers rotate into stocks such as Tenet, he adds. It just one of many stocks in this sector that are under-owned.

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THE GREAT FIREWALL

As speculation suggested would happen, on Monday Google announced that is shuttering its search engine based in China. But they’re not pulling out of the market all together.

Instead Google is shifting its customers to its Chinese-language service based in Hong Kong – off of mainland China -- but not out of the market all together.

In case you’re like us and wondering why Hong Kong is ok, we did some research and found that as a former British colony, Hong Kong is a special administrative region of China and enjoys more freedom, including an uncensored Internet.

Google does intend to keep its engineering and sales offices in mainland China so it can keep a technological toehold in the country and continue to sell ads for the Chinese-language version of its search engine in the United States.

What must you know?

I think Google has just blown this completely, says Colin Gillis, of BGC Partners. By taking this path not only have they put their desk top search business in China at risk but they’ve put other areas of the business at risk, too. I’m not saying it’s going to hurt their quarter but many analysts see China as a growth market and the bottom line is, they’re not there anymore.

It all seems suspicious to me, muses Brian Kelly. Google is run by smart guys and I can’t help but think they would never have made a move like this unless they had something else going on. I can’t help but wonder if a US government contract comes their way down the line.

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EAR TO THE WALL: MARTIN MARIETTA (MLM)

Pete Najarian has spotted unusual options action in materials company Martin Marietta .

The large volume of call buying suggests to Najarian that this stock could make a sharp move higher.

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Trader disclosure: On March 22nd, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Najarian Owns (AA) Calls; Najarian Owns (BAC) Call Spread; Najarian Owns (C) Calls; Najarian Owns (CLX) Calls; Najarian Owns (MCD) Call Spread; Najarian Owns (MLM) Calls; Najarian Owns (MYL); Najarian Owns (PFE); Najarian Owns (TEVA); Najarian Owns (YHOO) Calls; Najarian Owns (OSIP) Calls; Najarian Owns (DD) Calls; Najarian Owns (BBY) Call Spread; Najarian Owns (AKAM) Call Spread; Terranova Owns (QCOM), (OIH), (POT); Terranova Owns (GS) April Puts; Terranova Is Short (UAUA); Terranova Is Short (CAL); Terranova Is Long May Crude Oil Futures; Terranova Is Short (GS); Karabell Owns (C), (JPM); Cortes Owns (IBB), Is Short S&P Futures; Kinahan Owns (C), Is Short (C) Puts; Kinahan Is Short (SPY) Through Options; Karabell Owns (GOOG); Kinahan Owns (WFC), Is Short (WFC) Puts

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