President Obama is putting pressure on Congress to finalize everything on the health care reform before the year’s end which will likely makes the healthcare and medical sectors even that much more attractive.
The sector has been attractive due to the growth in elderly population, an increase in diseases and cancer rates and the desire to live longer and healthier lives. Additionally, the sector is favorable due to its continuous year-over-year revenue growth. The proposed reform is expected to further accentuate the sector’s appeal by increasing accessibility to prescription drugs and adding tens of millions of customers to health care companies.
Although it appears that those affiliated with the health care industry should be smiling from ear to ear, they aren’t. Opponents of the reform are against the idea of a government-run insurance program and drug makers are upset over the billions of dollars in rebates they will have to fork over to the government over the next 10 years. Additionally, medical device providers are upset because they will be forced to pay a 2.5% tax to the government on all of their products.
At the end of the day though, there is hope for the sector, in particularly drug makers and hospitals. Lobbyists for Big Pharma have managed to include an $80 billion rebate agreement in the reform, while also successfully winning a fight that would have required some of its largest players to pay back another $106 billion in additional rebates over 10 years.
As for hospitals, they were able to keep intact a $155 billion deal enabling them to accept lower payments from Medicare and Medicaid.
Three equities expected to remain in an uptrend are:
The iShares Dow Jones U.S. Health Care Providers (NYSEARCA:IHF) which gives exposure to hospitals. IHF is up 71% from a March low of $26.68 to close at $45.55 on Tuesday.
The Vanguard Healthcare ETF (NYSEARCA:VHT), which gives broad exposure to the healthcare sector. VHT is up 41% from a March low of $37.58 to close at $52.90 on Tuesday.
The iShares Dow Jones U.S. Medical Devices (NYSEARCA:IHI), which focuses on the medical device sector. IHI has rebounded from a March low of $31.69 to close at $50.37 on Tuesday; an increase of 59%.
When investing in these equities, inherent risks are involved. A good way to mitigate these risks is through the use of an exit strategy. According to the latest data at www.SmartStops.net, an upward trend in the previously mentioned ETFs could come to an end at the following price points: IHF at $42.11; VHT at $51.25; IHI at $48.77. Keep in mind that these price points fluctuate as market conditions change and updated data can be found at www.SmartStops.net.