Polliwog’s Funtleyder: How to Make Money from Obamacare

Friday, 16 Nov 2012 08:13 AM

By John Morgan

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Obamacare is apparently here to stay, and one way to make the most of it might be to pursue profitable investments in healthcare stocks.

The list of winners and losers within the sector is long and diverse, according to Yahoo.

Les Funtleyder, president and fund manager of Polliwog Investment Advisors and author of the book “Healthcare Investing,” told Yahoo it is best to pick individual healthcare stocks rather than to chase sector plays such as the Health Care Select SPDR exchange-traded fund (XLV).

Editor's Note: Obama Donor Banned This Video But You Can Watch it Here

A case in point is certain healthcare equipment stocks. Funtleyder favors two of them, Intuitive Surgical (ISRG) and Varian (VAR). “Intuitive and Varian both have new products. And both have products that improve the quality of health and lower the costs,” he said.

“If you can improve quality of health and lower costs, that makes everybody happy.”

But Funtleyder is more bearish on ExpressScripts (ESRX) and WellPoint (WLP) due to their recent losses.

“It’s a question of pricing pressure. Eventually you’ve cut as much as you can and you’ve just mispriced your book of business,” he told Yahoo.

“This market is very harsh on those who underperform.”

Funtleyder believes biotech stocks are in a good position. “When interest rates are low, biotech does well because [lower rates] force people into risky assets,” he stated.

Meanwhile, MarketWatch columnist Nigam Arora wrote that the best way to profit from Obamacare is to buy hospital stocks, as utilization rates will increase and uncollected receivables will go down as a result of the legislation. Stocks he cited in this area included Tenet Healthcare (THC), Community Health Systems (CYH), LifePoint Hospitals (LPNT) and Universal Health Services (UHS).

Arora said health maintenance organizations that focus on Medicaid and other government program will also be big beneficiaries of Obamacare. He singled out Centene (CNC), Molina Healthcare (MOH) and WellCare Health Plans (WCG) in this area.

Obamacare is also positive in the short run for generic pharmaceutical companies such as Teva (TEVA) and Mylan (MYL), Arora wrote, and for certain drug distributors such as McKesson (MCK) and Cardinal Health (CAH).

Obamacare represents the most sweeping regulatory overhaul of the U.S. healthcare system since the passage of Medicare and Medicaid in 1965. The legislation is aimed at decreasing the number of uninsured Americans and provides a number of mechanisms — including mandates, subsidies and tax credits — to employers and individuals in order to increase the coverage rate.

Many of the most significant provisions of Obamacare are set to take effect by Jan. 1, 2014.

Editor's Note: Obama Donor Banned This Video But You Can Watch it Here

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