Three days of oral arguments have begun at the Supreme Court to determine whether portions of the Affordable Care Act are constitutional. Day One consisted of arguments over whether the case should even be heard now, and it appears that the justices agree that it should.
With that in mind, Bernstein Research analyst Ana Gupte is encouraging investors to dip their toes into the waters of uncertainty.
“We recommend buying Managed Care during the noise and volatility given closure will result in multiple expansion as investors are better able to predict cash flow and earnings with this uncertainty behind them. We see United Health (UNH) as most hedged against all outcomes and likely to rally the most post closure. Humana (HUM) is the most defensive name with least exposure to this investment controversy given its concentrated exposure to Medicare. WellPoint (WLP), Coventry Health Care (CVH) and Aetna (AET) should see a lift of the overhang in a bull case scenario if the mandate be determined unconstitutional while other onerous provisions that pose margin headwinds are also severed with the mandate.”
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