The one-year stock price chart of WCG versus MOH shows both stocks are trading close to the 52-week highs.
WellCare is expected to finish 2013 with a similar annual EPS than it achieved last year. Revenue is expected to be up 26% from the previous year. WCG has a clean balance sheet with total cash per share as of the quarter ending June 30 of $34.59.
It appears that the promising prospects for Medicaid and Medicare insurers are already reflected at current price levels. Molina has had a great run with its share price up over 120% in the past 24 months. WellCare has done slightly less than half that well with about a 64% two-year price increase.
If the funding and demand for Medicaid increases in the year ahead there are reasons to anticipate more share price growth, especially if one or both companies declare a sustainable dividend.
WCG has a market cap of less than $3.2 billion. MOH is slightly more than half that size weighing in with a market cap of only $1.68 billion. Both these profitable companies may be takeover targets, but MOH seems particularly affordable to a big acquirer who see a synergistic fit.
If you plan to invest in both these collateral beneficiaries of Obamacare, consider scaling in gradually, buying a third or even half of a position size at a time. You might consider buying these two plus the third big name in this subsector,
(CNC - Get Report)
Analysts anticipate CNC to experience a 27% jump in EPS next year over this year. The St. Louis company hit a 52-week high on Friday Oct.4th and trades too rich for my appetite at a current PE of 48 and a forward (one-year) PE ratio of almost 19 times earnings.
I'd want to see it correct before I'd nibble on CNC, but MOH and WCG are ripe for scaling into and if shares drop, celebrate and buy some more.
Ready or not, here comes Obamacare, so investors might as well reap the benefits and the companies that will be as well.
At the time of publication the author had no position in any of the stocks mentioned.
This article was written by an independent contributor, separate from TheStreet's regular news coverage.