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TheStreet Open House

Obamacare Delay Is Good for Health Stocks

Stock quotes in this article: AET, CNC, HNT, HUM, UNH, WCG, WLP

NEW YORK ( TheStreet) -- On July 3 we learned that the implementation of an important component of the Affordable Care Act would be delayed one year to January 2015.

Under Obamacare employers with more than 50 employees were mandated to provide health care coverage by January 2014, or pay a fine based upon the number of employees. The delay of one year caused health maintenance stocks to drift lower until recovering with the stock market on Friday and Monday.

In my judgment this one year delay may be beneficial to both employers and the health care companies as it gives them the time to work on new more affordable health plans and avoid the pending penalties. Providing health care benefits should be considered a cost of doing business, and if these costs can be better managed between businesses and providers, companies can strategize on their business plans rather than avoiding the mandate. This delay provides a window of opportunity for additional economic growth.

On April 3 I wrote, Health Insurers Gain On Medicare Advantage where I profiled eight health maintenance stocks. Four were rated buy and four were rated hold. Only three had performed positively over the last 12 months at that time. Since this post Coventry Health was acquired by Aetna (AET), so today's table of health care stocks totals seven companies.

ValuEngine shows that the medical industry is 19.3% overvalued with the health maintenance industry 12.2% overvalued. I continue to give the medical sector an equal-weight asset allocation rating.

In today's table note that only one out of seven are undervalued and that only one has a buy rating. The performance for these stocks improved significantly since April 3 with six of seven showing gains over the last 12 months between 10.4% and 66.3%. These stocks report their quarterly earnings reports between July 18 and August 7.

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