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,
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
, 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.
Reading the Table
Stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine.
A "1-engine" rating is a strong sell, a "2-engine" rating is a sell, a "3-engine" rating is a hold, a "4-engine" rating is a buy and a "5-engine" rating is a strong buy.
Last 12-Month Return (%):
Stocks with a red number declined by that percentage over the last 12 months. Stocks with a black number increased by that percentage.
Forecast 1-Year Return:
Stocks with a red number are projected to decline by that percentage over the next 12 months. Stocks with a black number in the table are projected to move higher by that percentage over the next 12 months.
Price at which to enter a GTC limit order to buy on weakness. The letters mean; W-weekly, M-monthly, Q-quarterly, S-semiannual and A-annual.
A level between a value level and risky level that should be a magnet during the time frame noted.
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Price at which to enter a GTC limit order to sell on strength.
($63.26 vs. $54.30 on April 3): Set a multi-year high at $64.22 on July 1 before the Obamacare delay was announced. My annual value level is $62.77 and a monthly pivot at $63.19.
($54.49 vs. $44.57 on April 3): Set a new multi-year high at $54.63 on Monday and has been downgraded to hold from buy. My semiannual value level is $50.96 with a monthly risky level at $54.85.
($32.07 vs. $29.12 on April 3): Has been moving sideways since setting its 2013 high at $33.30 on April 29. My quarterly value level is $25.06 with an annual pivot at $32.54 and annual risky level at $35.35.
($84.27 vs. $79.11 on April 3): Has been upgraded to buy from hold since April 3. My quarterly value level is $76.55 with an annual risky level at $89.78.
($67.56 vs. $61.74 on April 3): Set a new multi-year high at $67.58 on Monday and has been downgraded to hold from buy. My semiannual value level is $62.39 with a semiannual risky level at $73.01.
WellCare Health Plans
($57.86 vs. $62.57 on April 3): Moved back above its 50-day and 200-day SMAs at $54.46 and $53.59 on June 27. The stock has been downgraded to hold from buy. My weekly value level is $50.66 with a quarterly pivot at $57.40 and monthly risky level at $60.04.
($83.09 vs $68.46 on April 3): Set a multi-year high at $83.16 on Monday and has been downgraded to hold from buy. My monthly value level is $77.28 with a semiannual pivot at $81.89 and semiannual risky level at $83.77.
At the time of publication the author held no positions in any of the stocks mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Richard Suttmeier has an engineering degree from Georgia Tech and a master of science from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. In 1981 he formed the Government Bond Department at LF Rothschild and helped establish that firm as a primary dealer in 1986. Richard began writing market research in 1984 and held positions as market strategist at firms such as Smith Barney, William R Hough, Joseph Stevens, and Rightside Advisors. He joined
in 2008 producing newsletters covering the U.S. capital markets, and a universe of more than 7,000 stocks. Richard employs
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