Healthcare Sector Overview

Healthcare reform has been a hot topic of discussion in the news and on blogsites all over the country as the Obama administration mulls over whether or not a public option for healthcare makes sense and what a plan like that would entail. Any new reform to the current healthcare plan would have a great effect on stocks within the Healthcare sector.

Below is a list of stocks we find attractive and a few that we find unattractive within the S&P 500 Health sector. The chart consists of each company’s attractiveness as an investment opportunity using The Applied Finance Group’s (AFG’s) buy/sell criteria (explained below), and also grades each company based on expected Economic Margin (EM) change and valuation ranks within the sector. Companies expected to improve EMs and that have a more attractive valuation than their sector peers have proven through backtests to be more likely to outperform than stocks AFG views as overvalued and that have an expected decline in EMs.

click to enlarge

Source (The Applied Finance Group)

*Valuation & EM Change are Ranks within their sector

AFG's Buy/Sell Criteria - factors in Economic Margin, Management Quality, and AFG's Valuation Metric. In order to determine Management Quality, AFG scores management on their growth decisions in accordance with the company’s ability to either create or destroy wealth. AFG's Valuation Metric measures a company's Percent to Target (the deviation between a stock's current trading price and its AFG current default target price). To derive the intrinsic value of a firm, AFG uses its proprietary Valuation Model.

Comments

[Matt Zimmerman:]

Of course, public option is an essential part of the reform. It's not just one silver of it. It's a big part of it!

Obviously, the reform has an effect on these stocks because the reform, like what MSNBC reports in this vdo, will pump $60 billion a year directly to health insurance industry! That's why these companies spend extensive efforts to lobby Obama to pass the bill.

www.newsy.com/videos/w...

Without public option, Obama's also turning many of his supporters into opposers. And, as long as this argument continues, everything will get worse. The public trust towards Obama will decline, which will eventually affect other bills he aims to pass in the future.

Aug 18 01:52 PM

[thotdoc:]

This is not a helpful article, to me at least.

Explain your thinking. No one is going to steal your great ideas.
What are your criteria? What is the process for plying your criteria?

ISRG has a great management team. I've followed them for years and am a management consultant that has started 2 tech startups and a bio-medical startup. What do you not lik about them? What do you not like about the other management teams? ETC.

Aug 19 11:56 AM

[Deltaxray7:]

I'm not sure the Obama administration cares whether the plan "Makes Sense" as much as they want to push the socialist agenda onto the working taxpayers of America.

If the public option happens, I doubt if a single insurance company in America will survive.

Aug 28 01:12 PM