Both Hillary Clinton and Donald Trump have shown an interest in keeping pharmaceutical prices low. That's where agreement on healthcare policy between two major-party presidential candidates ends. If you're a healthcare investor watching the election, what each candidate believes -- and who might win -- could have a huge impact on your portfolio.
"Investors often tend to fear the unknown more than anything else," analyst Scott Fidel of Credit Suisse wrote in a note this week on the candidates and healthcare stocks. "In the 2016 elections, Donald Trump represents the specter of the unknown to a larger degree than any leading presidential candidate in our lifetime."
If you've got healthcare companies in your portfolio, it's worth wondering, how would a Clinton or Trump administration affect them. And there's no better time to answer that question than on the eve of the first presidential debate.
Managed Healthcare Companies
These firms would likely do well under both Clinton and Trump, though better under Trump.
Trump has said that he plans to repeal the Affordable Care Act and that he wants to allow consumers to buy healthcare plans across state lines. It's likely then that Trump would push to allow the insurance mega mergers between Anthem (ANTM - Get Report) and Cigna (CI - Get Report) and Aetna (AET) and Humana (HUM - Get Report) . If that happens, look for a boost in these stocks, in addition to UnitedHealth (UNH - Get Report) .
Trump has said he wants healthcare spending accounts to be available to individuals, rather than just businesses.
"We believe the diversified managed care stocks would likely outperform our overall coverage universe if Trump were to defeat Hillary Clinton in the election; the ACA has been dilutive for them while Clinton has expressed hostility towards large-scale M&A for the managed care organizations," Fidel wrote.
Meanwhile, Clinton has said she will defend the Affordable Care Act while doubling funding for community healthcare clinics. She has indicated that she will bring down copays and deductibles for consumers.
Additionally, both candidate's support of driving down drug prices will likely be a boon to managed healthcare companies.
"Turning to the more negative aspects of Hillary Clinton's health care proposals for MCOs, she has recently keyed into the issue of limiting the ability of health insurers to shift health care costs onto the consumer," Fidel wrote.
Medicaid Managed Care Companies
Firms that play in this space would probably be much better off under Clinton.
Clinton's healthcare policy will likely benefit healthcare companies that cater to patients using Medicare and Medicaid.
"As a result, we believe that Medicaid managed care stocks such as Centene Corp. (CNC - Get Report) , Molina Healthcare (MOH - Get Report) and Wellcare Health Plans (WCG - Get Report) would likely outperform the diversified managed care organization stocks in the eventuality of a Clinton win, as investors would see the potential for additional states to expand Medicaid while these stocks would also be favored as likely take-out candidates," Fidel wrote in a note.
Trump has indicated that he wants to block grant-Medicaid programs. The Republican party tends to oppose Medicaid and Medicare expansion, which could affect companies like Molina Healthcare negatively.
Acute care hospital stocks stand to benefit most from a Clinton presidency. These include Tenet Healthcare Systems (THC - Get Report) , Community Healthcare Systems (CYH - Get Report) and Quorom Health Corp. (QHC - Get Report) , many of which are either considering a sale, or The Deal has identified as potential takeover targets.
"Hillary Clinton's health care policy views are largely favorable for the hospitals, including: her support to defend and expand the Affordable Care Act, incentivizing states to expand Medicaid, and reducing out-of-pocket costs (e.g. copays, deductibles)," Fidel wrote.
Trump hasn't done much to indicate whether he would boost or harm hospital stock companies, however, Fidel noted that a Trump presidency could push these stocks down, at least on the outset.
"The acute care hospital stocks are highly leveraged to sentiment around the outlook for the ACA and the removal of even a low-probability (but highly binary) downside risk like a Trump win will likely push these stocks higher, at least in the short-term," Fidel wrote.
Pharmaceutical and Biotech Companies
Though during the last election, health insurers were the central focus, the villain of the 2016 election seems to be the pharmaceutical industry. On several occasions, Clinton was able to move pharmaceutical stocks with a single tweet.
"We don't anticipate major change in drug pricing for either candidate," analyst Damien Conover of Morningstar said. "When we look at some of Clinton's proposals, which are more detailed than Trump's, there could be some pressure on the generics industry."
In the pharmaceutical industry, Clinton has said she will stop direct-to-consumer drug advertising. She will also prohibit companies from engaging in a pay for delay schemes, which currently allows companies to pay competitors to hold off on bringing generics to market.
Meanwhile, Trump has indicated that drug prices should be lower, but has yet to set forth a policy on how he will handle the issue.
"As we move out of the election season and past this rhetoric, the risk will be taken off the stocks," Conover said, noting that pharmaceutical companies will likely bounce back soon after the election is over.