Today is Thursday, May 17, 2012

Stocks Medical

Pfizer (PFE) looks like a good long-term buy for income investors

While I believe the stock market is due for more of a correction in the face of a sluggish economic outlook, I'm looking for stocks that will pay nice dividends and will appreciate over the next five to 10 years. Thus, this morning, I bought a small position in Pfizer (PFE) and will add to that position over time unless something goes terribly wrong. Here's why:

Health insurers’ stocks jump on news Obama will try to force ObamaCare on Americans

Speculators apparently think that price controls would be good for health insurers.

That’s the message health insurance stocks are sending. They’re up more than 1%. The idea is that if Obama nationalizes health insurance and health care, health insurers will make more money even though Obama and Pelosi would effectively run the companies for their own benefits. Or, it may be that speculators like Wellpoint’s politically tone-deaf and self-destructing 39% increase in Anthem Blue Cross and Blue Shield premiums. Makes no sense to me.

Health insurers’ stocks have plunged since Senator Scott Brown’s election

The stocks of health insurers have plunged since Jan. 19 not only because the over all market has faded but also because Congressional Democrats and President Obama appear to be looking for ways to punish insurers because the politicians couldn’t sell a bad health insurance reform bill to voters. Note that Senator Scott Brown (R-MA) won his election on Jan. 19, taking away the Democrats’ super majority in the U.S. Senate and killing the versions of ObamaCare that had passed the Senate and House.

Obviously, a lot of speculators thought, incorrectly I think, that the insurers would have profited from ObamaCare’s requirement that individuals would be forced to buy health insurance. If the mandates had passed, the politicians would have found ways to take all of the profit and then some out of the new business they would have handed to the insurers.

Here are charts for AET, CI, CVH, HS, HUM, UNH, WLP, and the exchange traded health funds, XLV, IYH and VHT. Click on a chart for more information.

Why buy insurers’ stocks when Obama health bill (HR 3590) would bankrupt them?

On Monday, liberals sneered when insurers’ stocks rose, indicating that speculators thought ObamaCare (HR 3590) would be good for the big regional companies. But today several of the stocks are sinking, probably in response to University of Chicago Professor Richard A. Epstein’s op-ed piece in The Wall Street Journal, Harry Reid turns insurance into a public utility; the health bill creates a massive cash crunch and then bankruptcies for many insurers. His original, more detailed argument is here.

Here are charts for AET, CI, CVH, HS, HUM, UNH and WLP. Click on a chart for more information. The stocks that are sinking serve the individual and small group markets. Those that are rising are less invested in those markets, I think.

Now, the big companies might benefit from 

Why are health insurers’ stocks falling?

Why are health insurers’ stocks off their recent highs?

Charts for AET, CI, CVH, HS, HUM, UNH, WLP, XLV, IYH and VHT are here.

It could be profit taking. Speculators may be worried that ObamaCare (HR 3950) will require insurers to sell insurance people with pre-existing conditions without imposing tough, costly fines on free riders who don’t buy insurance. If people are allowed to buy insurance only after they become ill, they will. And premiums will soar for those who do buy insurance. Either way, insurers’ small 2% to 5% profit margins would shrink.

Some speculators may be thinking that 

Health insurers’ stocks show little fear of Nancy Pelosi’s health spending bill (HR 3962)

Health insurers’ stocks have been rising smartly since late last month. This suggests that speculators aren’t giving much of a chance for passage to the health spending bills before Congress (S 1796, HR 3962). Check out these charts for

AET, CI, CVH, HS, HUM, UNH, WLP, XLV, IYH, VHT. Click on a chart to see hourly, daily, weekly and point and figure charts.

Aetna, Wellpoint, Humana fall on health insurance reform news

Aetna, Wellpoint, Humana, Cigna and other health insurers are continuing to fall under pressure from political attacks by Congressional leaders and President Obama.  The politicians are trying to create a government-run public option health plan (government HMO, PPO, Fannie Med) that would compete with the nation’s 1,300 insurers. And they are moving to take anti-trust exemptions away from health insurers. How important the latter move is to insurers is hard to tell at this point. More about that later.  Wellpoint’s hourly, daily, weekly and point and figure charts all are very bearish. At the moment, it’s trading at $46.47, down 1.13% on the day. It’s bearish point and figure price objective is $34. The point and figure price objective shows that there are way more buyers than sellers of the stock. The P&F price objective is not a prediction, and it often is overshot on both the bullish and bearish sides. Stocks reach their P&F price objectives about 70% of the time, and the objectives can change quickly after prices stage sudden trend reversals.  Links Charts for AET, CI, CVH, HS, HUM, UNH, WLP, XLV, IYH, VHT Click on a stock’s chart to see hourly, daily, weekly and point and figure charts like these for Wellpoint. Good time to buy health insurers, pubic option futures contract? Well, I was a little early on this call.

Good time to buy health insurers, pubic option futures contract?

Congressional leaders are watering down proposals for a government-run HMO or PPO, increasing the chances that such a plan will pass.

This raises the possibility that the recent sharp corrections in the prices of health insurers’ stocks may be about over. The health insurers may rally.

But, at the same time, the stocks of other health care companies, which

Barron’s says medical devices’ stocks are undervalued, but they’re going down

Michael Santoli writes in Barron’s that medical device stocks are attractive, but the charts show that they’ve been weakening over the last week along with insurers and hospital companies.

The Barron’s article may give the medical device stocks a bounce, but that depends to a large degree on what happens to the overall markets Monday, I think.

Speculators say 24% chance Obama’s public option will pass

Speculators on Intrade are a bit more optimistic about the chances that Obama’s public option health plan will be enacted by January. Or are they pessimistic?

They’re giving the public option a 24% chance of enactment, up from a recent low of about 18%, but still way below last summer’s high of about 45%.

Perhaps more important, health insurers’ stocks have fallen rather dramatically over the last seven trading sessions. Charts are here.

Hospital companies’ stocks also have weakened. Charts are here.

Health insurers’ stocks fall even though health insurance reform’s prospects look weak on Intrade

There is only a 26% chance that a health insurance bill with a public option health plan will pass by January 1, according to the speculators trading the health care reform futures contract on Intrade.

But speculators in health insurance stocks have started selling those stock in recent days. This could be profit taking after a nice run up, or it could reflect the impact of President Obama’s attacks on health insurers and talk that if any legislation passes, it will include major health insurance market reforms, if not the public option.

Charts for health insurers are here.

Charts for hospital chains are here.

Charts for drug makers are here.

Charts for medical device and supply makers are here.

Charts for long-term care stocks are here.

Chart for health stock exchange traded funds are here.

Click on a chart to see a gallery of charts for a stock or ETF.

Disclosure: I own BDX and options on STJ.

Will hospital stocks’ rally continue?

Since early July, most hospital companies’ stocks have been rallying in anticipation of relief from uncompensated care costs under proposed health insurance reform bills. On Wednesday, however, profit taking hit the stocks in a small way.

The rally got an added boost in the last week from positive earnings reports and guidance by Community Health Systems (CYH) and Universal Health Services (UHS).

Tenet Health Care (THC) Tuesday reported a small loss on increased revenues. Lifepoint Hospitals (LPNT) reports Friday.

In its conference call with securities analysts, Tenet said the health care reform bills before Congress would relieve it of the cost of uncompensated care of the uninsured and of the cost of charity care. Tenet didn’t say any more about the health insurance reform debate and how the legislation would affect the company.

Some Democrats are pushing for better Medicare reimbursements for most of the hospitals in rural areas, many of which are owned by publicly-owned hospital companies. This could help their bottom lines.

But one has to wonder whether cuts in overall Medicare and Medicaid payments to hospitals would cost them more than the uncompensated care currently costs them. And if Medicare and a public government health plan sharply curtail access to care, what will happen to hospitals’ revenues and profits?

Also, we’re still in a recession, and Tenet told analysts that it saw significant declines in business with commercial HMOs. If unemployment continues to rise, as many expect, or if it just stays at 9.5%, more unemployed people will drop their COBRA insurance and become uninsured. This means commercial insurance business will continue to be weak for hospitals.

Thus, while some hospital companies have been cutting costs and improving margins, it’s hard to see how that can continue.

Disclosure: I don’t have positions in these stocks.

Health insurers’ stocks may be headed for a correction on political uncertainty

Health insurers’ stocks began correcting late last week and may correct some more in response to renewed uncertainty about what kind of health insurance reform legislation, if any, will make it through Congress this year.

After rallying in anticipation of a watered down health insurance reform bill, if any, health insurers and other health stocks face two or three months of uncertainty as President Obama, members of Congress, lobbyists and the public fight over what ObamaCare will be.

Markets weaken in the face of uncertainty, and the uncertainty in the health stocks markets rose late last week as the last House committee approved a bill that includes a somewhat watered down but still strong public option health plan. The Senate Finance Committee’s gang of three Democrats and three Republicans are trying to come up with a bill that would win at least 60 votes in the Senate. If they can’t, the Democrats will try to push through their health care reform in a budget reconciliation bill. But that reportedly would force them to drop a lot of health insurance reforms.

Thus, while House Democrats appear poised to battle over bills approved by three different committees, the fact that four Blue Dog Democrats last week caved in and voted for a bill that provides for the public option health plan creates uncertainty about what all 52 Blue Dogs will do when a bill finally reaches the House floor. Will they put their Congressional careers in jeopardy by voting for a bill that includes a public option, end-of-life counseling, Medicare cuts, tax increases and coverage for illegal immigrants and abortions? It seems unlikely, but it still could happen, especially if public opinion polls show increased support for such a bill.

At the moment, polls show only 41% of voters approve of the way Obama is handling the health care debate. And his overall approval ratings are below where President George W. Bush’s were at the same point in his career. Recall that W. was hardly popular after the Supreme Court ruled for him and against Al Gore. So Obama’s approval rating is surprisingly low, and that is negatively influencing Congressional thinking about health insurance reform legislation.

Yet, Obama and Congressional Democrats are showing they are willing to make compromises that will help them pass some kind of health insurance reform legislation.

How much they’ll have to give up remains to be seen. And that is the big uncertainty facing speculators trading health insurers and other health stocks.

Health insurers seem the most vulnerable at the moment. This is because the industry is being demonized by Speaker Nancy Pelosi and other supporters of ObamaCare.

To date, the insurers have put up a weak defense. Indeed, they’re digging fox holes that may go to China. They’re defending indefensible state and federal laws and regulations that they helped write and even wrote in many cases. Those laws and regulations allow them to medically risk rate individuals and small groups instead of community rating them. Congress is strongly in favor of community rating, which would force health insurers to act like insurers instead of letting them insure only low-risk people.

If the insurers accepted community rating, the public option might be compromised away. But they’re gambling on gridlock.

At this point, speculators on Intrade.com are betting that there’s a 41% chance that health care reform will be enacted by Jan. 1, 2010. That’s up from just below 30% early last week.

The Intrade health care reform market has been volatile, and that volatility probably will continue well into the fall.

Look for the same kind of volatility in health insurance stocks and other health stocks.

Charts for health insurers are here.

Charts for hospital chains are here.

Charts for drug makers are here.

Charts for medical device and supply makers are here.

Charts for long-term care stocks are here.

Chart for health stock exchange traded funds are here.

Click on a chart to see a gallery of charts for a stock or ETF.

Disclosure: I own BDX and options on STJ.

Speculators are betting health insurance reform won’t hurt insurers, hospitals, drug makers, devices

Speculators seem to be betting that a watered down health insurance reform bill won’t hurt health insurers, hospitals, drug makers or medical device and supply manufacturers.

Stocks for almost all of these health sectors and for exchange trade funds that track health stock indexes turned higher last week.

Why?

1. Congress is not going to get health bills through the Senate or the House by the August Congressional recess in face of strong opposition by a minority of Democrats in both houses. This means opponents of the health insurance reform bills will have at least 45 days to convince members of Congress and the public that the bills favored by the president and his hard left supporters in Congress are a bad idea.

2. It is very unlikely that Congress will create a public option health plan, or Government HMO (Fannie Med). The votes aren’t there. This is a bit bullish for health insurers over the short term. White House talk about taxing insurers that offer gold plated health benefit plans makes no sense because few do. If such taxes were enacted, insurers would stop offering or administering such plans, and self-insured employers probably would drop them as long as union contracts didn’t lock them into such plans.

3. If the very liberal Coastal Democrats who lead Congress and most of the five commitees drafting health insurance legislation want to get the support of Democrats from Western, Midwestern and Southern states, they’ll have to up Medicare payments to providers in those states. This is bullish for hospital chains, which operate mostly in the fly-over states.

4. The Congressional Budget Office Saturday threw cold water on the idea of putting MedPac, a panel of self-interested health care and medical experts who would be subject to tremendous political pressure from Congress, in charge of deciding what insurers would cover and how much they would pay for procedures. The panel would save only $2 billion out of trillions over 10 years, the CBO guessed. And it was being generous to the idea that MedPac would save anything. This is good for drug and medical device makers, because it lessens the threat of new price and utilization controls on their products.

5. While http://www.intrade.com bettors think there’s at least a 46% chance that some kind of health insurance reform will be enacted before year end, the polls are showing Americans are increasingly opposing the bills before Congress. The politicians who created the laws and regulations that make Medicare, Medicaid, SCHIP and state and federal regulations of health insurance markets unworkable failures are promising to fix the health markets. They have less and less credibility every day.

6. Proposals to tax millionaires to pay for covering the uninsured and increasing benefits for others are in trouble, if not dead on arrival.  The economy’s in no shape to be stalled by tax hikes, and there appear to be enough Democrats opposed to the tax to stop it.

7. While the so-called Blue Dog Democrats are stalling health insurance reform for economic and ideological reasons, the Congressional Black Caucus has made it clear that it won’t support a bill that the Blue Dogs will support. Throw in the opposition by anti-abortionists who don’t want the legislation to use taxpayers money to pay for abortions, and you have a pretty complex political problem for President Obama, Sen. Majority Leader Harry Reid (D-NV) and Speaker Nancy Pelosi (D-CA). While the Speaker claimed Sunday that she has the votes to pass health insurance reform, few believe her.

Some Democrats are saying that drafting health insurance reform bills is 70% to 80% done and it won’t take long to get a bill. Other Democrats are saying they want to take the time to write good legislation. The question is, can the Democrats and a few Republicans resolve the last 20% to 30% of the issues that need to be agreed upon to get a bill? It doesn’t look very good for health insurance reform at the moment, but some kind of a bill may pass in the next year or so, if not this year. Presidents Reagan, Clinton and Bush II all enacted major health legislation in their third and later years in office. All three bills have been financial and health care disasters.

Charts for health insurers are here.

Charts for hospital chains are here.

Charts for drug makers are here.

Charts for medical device and supply makers are here.

Charts for long-term care stocks are here.

Chart for health stock exchange traded funds are here.

Click on a chart to see a gallery of charts for a stock or ETF.

Disclosure: I own BDX and options on STJ.

Waxman’s attack on Obama’s deal with drug makers depresses pharma and hospital stocks

Rep. Henry Waxman (D-CA) helped depress most drug and hospital stocks Thursday with his warning that the Obama administration doesn’t feel bound by its deal with pharmaceutical companies and that Congress isn’t bound by that deal.

The markets obviously didn’t believe the White House denial that anyone working there said President Obama isn’t bound by the deal he made with drug makers, which made a vague promise to help the government save some $80 billion on drug purchases over the next 10 years.

This sent most drug stocks and health exchange traded funds lower Thursday. Daily charts for drug and medical device makers are here.

If the drug companies can’t depend on Obama and Congress to uphold their ends of the deal they thought they had with the politicians, then the drug makers appear to be more vulnerable to health reformers’ efforts to legalize reimportation of exported drugs, shorten the lives of patents on new biologic drugs and make the companies pay for advertising to consumers with after tax dollars.

Hospital stocks also fell because the industry’s $155 billion deal announced with President Obama and the Senate also is worthless, if it ever was worth anything. That deal supposedly protected hospitals against a variety of attacks under consideration in Congress, but it is being opposed by several state hospital associations that say the deal provides for costly cuts in Medicare payments that hospitals can’t afford.

Congress also is considering making tax-exempt private hospitals taxable. But that would only help publicly-owned hospital companies, because they could grow by snapping up not-for-profit hospitals after Congress made them for profit businesses. This assumes, however, that consolidators could get anyone to finance their acquisitions of more hospitals.

Hospital stocks also are down because speculators think that if health insurance market reforms die in Congress, hospitals won’t get any relief from the cost of serving the 6 million to 8 million uninsured Americans who can’t afford health insurance and aren’t qualified for existing government programs. And they would continue to be obligated to treat some 9 million to 15 million illegal immigrants without getting paid.

Daily charts for major acute care hospital chains are here.

With the major media reporting new splits over health care reform proposals in Democratic Party Congressional ranks daily, this hasn’t been a good week for health care reform or health insurance reform.

Health care reform may not be dead, but it’s in big trouble. In the long run, the death of all of the health reform schemes being considered in Congress would be good for most health stocks.

Daily charts for health insurers’ stocks, which were mixed Thursday, are here.

Disclosure: I own BDX.