NEW YORK (TheStreet) -- The Covestor Healthcare Model predicted that the implementation of the Affordable Care Act would be good for health care stocks because Americans previously lacking health insurance would join the ranks of the insured. Contrary to some observers, who had predicted that Obamacare would be a disaster, the Covestor Healthcare Model anticipated that this would be a job-creator and a business stimulus badly needed in an economy still weak following the financial crisis of 2008.
Let's take a look at some of the companies that have benefited from Obamacare and are likely to continue to do well. The Affordable Care Act sets up prescription drug coverage and encourages generics in order to minimize costs. One of the successful holdings in the Healthcare Model is Actavis (ACT) , which recently outbid Valeant (VRX) for Allergan (AGN) . Actavis is the third largest generic pharmaceutical company in the U.S.
One of the foundations of the broadening of health care coverage under Obamacare was the expansion of Medicaid that was initially required under the ACA. It became a voluntary decision by the states after a ruling of the Supreme Court. As of November 2014, 28 states (including the District of Columbia) have accepted federal funds for Medicaid expansion. It is estimated that 6 million people have been added to Medicaid since Obamacare was initiated. This brings Medicaid enrollment to about 65 million Americans, and work of managing these patients also creates investment opportunities for the Healthcare Model.
Centene (CNC) is involved in managing Medicaid patients for state organizations and has been a top stock performer in the Covestor Healthcare Model. It should continue to do well as Medicaid is likely to grow further as cost pressures drive more states to accept federal funds offering coverage for these liabilities.
Another feature of Obamacare has been the encouragement of Electronic Health Records to replace much of the paper charts of the past. This allows for quicker and more efficient billing and documentation and the sharing of data between providers and insurers to expedite health care and reimbursement. McKesson (MCK) , a top holding in the Covestor Healthcare Model, is a top Electronic Medical Record Company in the U.S.
Lastly, one of the companies receiving benefit from the Affordable Care Act is not one we might initially think of. Walmart (WMT) , which isn't in the Covestor model right now, is benefiting from the ACA by reducing its health care costs by dropping some part-time employees from company coverage and moving them onto the state exchanges where they might be eligible for subsidies or for Medicaid itself. Walmart will also benefit from the increased drug sales, including generics, at its more than 3,600 pharmacies. With improved and covered health care costs, many of its lower-income customers might have more disposable cash to boost the bottom line of its stores as well.
Obamacare has not been the disaster that was predicted. In fact, what has been undermining its success has been the meddling with the Act by the Supreme Court and further lawsuits challenging subsidies to the working poor on state exchanges that are still to be decided. Most companies have seen positive effects of this massive investment in health care that has boosted employment and stimulated the national economy.
For investors, our job is to put aside our own political views and determine which stocks may benefit and which may be hurt by changes that are taking place in our society.