NEW YORK ( TheStreet Ratings) -- On Thursday, the U.S. Supreme Court will hand down its ruling on the constitutionality of the Affordable Care Act, otherwise known as Obamacare.
There are three basic scenarios that may play out. The law may be deemed fully constitutional, partially unconstitutional, or thrown out completely. In my opinion, two of these three scenarios may be good of healthcare exchange-traded funds in the long-run.
If the Supreme Court puts their political leanings aside, follows the actual words of the U.S. Constitution's commerce clause, and the applicable Citizens United precedent, where corporate people have been mandated to make health safety purchases since the 70's, then Obamacare would be declared to be completely constitutional. This would be good for the health care stocks as uncertainty would be massively reduced and millions of new paying customers would be added to the health care system.
More insured people getting prescriptions for more drugs would benefit the "B" rated iShares DJ US Pharmaceuticals (IHE), "B" rated PowerShares Dynamic Pharmaceuticals (PJP), and "B-" rated SPDR S&P Pharmaceuticals ETF (XPH).The certainty of more customers would be good for the health equipment and service providers too. The "Buy" ranked health sector ETFs with exposure to these industry groups include the "B" rated First Trust Health Care AlphaDEX (FXH), "B-" rated Vanguard HealthCare Index ETF (VHT), and "B-" rated Guggenheim S&P 500 Eq Wght HC ETF (RYH). To bet on this outcome, it would be best to have positions in these funds prior to the ruling. On the other hand, if you believe that the Supreme Court will strike down the mandate but leave in-place the remaining facets of the Affordable Care Act then the play here would be to wait for the market's over-reaction to the downside before buying these good funds on the cheap. Corporations and their employees will be the big losers here as insurance costs skyrocket to maintain insurance company profits. While it would be unlikely that the entire law be struck down, this would be the worst possible outcome for health care related stocks. Not only did these companies spend millions of dollars buying politicians, but they also have spent a bunch of money preparing to implement the law.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV