This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Obamacare Boosts Health Sector

NEW YORK ( TheSTreet ) -- As Congress labored to pass Obamacare in 2009 and 2010, health stocks lagged the markets. Investors feared that the mammoth legislation would force health insurers to cover sick people, a process that would pinch profits. Pharmaceutical companies would be hurt by new fees that had been designed to cover the costs of the legislation. In addition, the complicated process created uncertainty, which unnerved investors and depressed even stocks that seemed likely to benefit as millions of consumers gained health insurance.

These days the picture looks brighter. With some of the uncertainty gone, health stocks have been climbing. During the past year, health funds returned 20.7%, outpacing the S&P 500 by 7 percentage points, according to Morningstar. Can the rally continue? Yes, say some mutual fund managers. They argue that Obamacare will provide a boost to some companies while inflicting only limited damage on insurers.

For years, health has been a growth sector. With demand for services increasing relentlessly, health funds returned 10.7% annually, during the past ten years, outpacing the S&P 500 by 2 percentage points. Health stocks were particularly appealing because they often showed defensive characteristics, outdoing the S&P in down markets. Obamacare will enable the health sector to continue performing much as it did in the past, says Eddie Yoon, portfolio manager of Fidelity Select Health Care (FSPHX). "As utilization of services continues increasing, this will still be a growth sector that is recession resistant," Yoon says.

Yoon cautions that some companies stand to gain more than others. He particularly likes medical software providers. As more consumers seek services, health costs will climb faster than analysts expect, he says. The inflation will lead hospitals and nursing homes to spend more heavily on software and technology that can help to control costs. "Right now hospitals don't have a clear picture of what their services really cost," Yoon says. "To become more efficient, they will have to buy software and build new kinds of infrastructure."

A leading health technology company that Fidelity has owned is Cerner (CERN - Get Report). It helps hospitals install electronic patient records that reduce paperwork and enable doctors to coordinate care.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AET $107.40 0.00%
CERN $73.28 0.00%
GILD $101.00 0.00%
JNJ $100.34 0.00%
PFE $34.53 0.00%

Markets

DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs