Health Insurance | Health Insurance Stocks For A Republican Win

February 4, 2012 – 4:52 am

Investors busy assessing how the state of the global economy will affect their stock portfolios should start thinking about how the presidential race will weigh in.

In particular, investors may want to look at how to play the health insurance space.

Health care remains a subject of divide between the two parties, with Republicans trying to repeal Obama’s nationwide health care reform since 2010. And, while it is unlikely they can overturn the entire law, they can certainly chip away at parts of it.

Related Links

Stock Futures Waver After Jobs Data

Kass: A Contrarian’s Dream

Walgreen Losing Customers Because of Express Scripts

If Republicans take control, Citigroup estimates that large commercial providers of health insurance plans may see their earnings grow by 5% to 10%. That kind of growth would increase these companies’ worth by 20%. The companies are currently estimated to see a 5% to 15% drop in earnings, according to a recent analyst report by the firm.

Within the broader managed care sector, which includes commercials plans, and Medicaid and Medicare plans, Citigroup says that valuations on most stocks should tack on at least an additional 2 multiple points. If a Republican fails to win the presidential seat but the party gains control of the senate, the valuation of the group would add up to one point.

This is all good if Republicans make a sweeping win, but what if President Obama takes office for second term? Even then, investors may benefit yet.

“The market seems to be discounting maintenance of the political status quo,” writes Citigroup, which estimates that managed care stocks are trading under the 9.5x 2012 earnings estimates.

Investors may want to skew their picks toward companies providing commercial plans. Under a Republican victory, Citigroup says stocks that would benefit most in this category rank in the following order: WellPoint (WLP), Coventry Health Care (CVH), UnitedHealth Group (UNH), Aetna (AET), CIGNA (CI) and Health Net (HNT).

For Medicare plans, the firm picks Humana (HUM), HealthSpring (HS), Universal American (UAM) and WellCare (WCG). All these companies provide elderly with Medicare through private health

Click here to view rest of article from original site