2 Hospital Stocks Set to Gain as Trumpcare's New Iteration Collapses

House Speaker Paul Ryan (R-WI) isn't giving up. He's now trying to propel through his unruly Republican ranks another bill to repeal and replace Obamacare.

Observers are calling the revamped legislation "Trumpcare 2.0." They're also calling it dead on arrival.

The GOP effort to try again on Trumpcare already is descending into acrimony and disarray. When it becomes apparent that this second effort won't work either, certain hospital stocks will probably get a large, sustained boost. Below, we highlight two of the most promising plays.

The collapse of the original Trumpcare last month has prompted traders to reassess the narrative of "Trump stocks." No one expected Obamacare repeal to fail so completely. Ironically, the health care stocks that will thrive under Trump are those that were thriving under Obama: Hospitals and managed-care facilities that emphasize cost containment.

The two optimal plays are Tenet Healthcare (THC) and Molina Healthcare (MOH) . They're especially attractive because they're mid-caps with considerable room for growth, which sets them apart from mega-cap peers such as HCA Holdings (HCA) and UnitedHealth Group (UNH) . Let's take a closer look.

With a market cap of $1.72 billion. Tenet is a diversified health care services company that operates 80 general acute-care hospitals, 20 short-stay surgical hospitals and more than 470 outpatient centers in the U.S., as well as nine facilities in the U.K.

Tenet's Conifer Health Solutions subsidiary provides information technology and cost-containment solutions to hospitals, health systems, integrated delivery networks, physician groups, self-insured organizations and health plans.

Tenet has thrived under Obamacare's expansion of health coverage, as well as the law's emphasis on enhancing health sector IT and lowering prices.

The average analyst expectation is that Tenet's year-over-year earnings growth will reach 12.50% in the current year, 49.60% next year, and 13.85% over the next five years on an annualized basis. Before the market opened Monday, THC shares were trading at $17.17. The average one-year price target from analysts who follow the stock is $24.00, for an implied gain of roughly 40%.

With a market cap of $2.65 billion, Molina operates health plans in several states for millions of members who are eligible for Medicaid, Medicare and other government-sponsored programs.

According to data from the Congressional Budget Office, an average of 62 million Americans were covered by Medicaid in any given month in 2016. The CBO estimates that this number will grow to 69 million in 2026, with 15 million made eligible through Obamacare's optional state expansion of Medicaid coverage and 54 million otherwise eligible. These factors amount to an enormous, long-term tailwind for Molina.

The average analyst expectation is that Molina's year-over-year earnings growth will reach an impressive 312% in the current year, 57.30% next year, and 26.47% over the next five years on an annualized basis. Before the market opened Monday, MOH shares were trading at $46.47. The average one-year price target from analysts who follow the stock is $50.64, for an implied gain of roughly 9%.

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John Persinos is an analyst with Investing Daily. At the time of publication, he owned none of the stocks mentioned.

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