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TMFHelical (98.71)

Helical Portfolio - Reconsidering Wellpoint

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March 29, 2012 – Comments (2) | RELATED TICKERS: WLP , UNH , AET

So the arguments before the Supreme court regarding PPACA (ironically tagged as Obama care) have been made, though it will be a time before we have their decision.  At the start of the case, I noted that the Helical Portfolio had a 10% position in health insurers, specificly in Wellpoint (WLP), and that this was "perhaps a bit high for such a binary risk consideration, but a risk with which I'm currnetly comofrotable."

So after listening for 3 days, I'm inclined to reconsider.  It is curious that the major insurers, like Wellpoint, United Health, and even Aetna are having a pretty nice week.  The larger insurers are speculated to benefit the most, as their scale should allow them to competitely thrive when state exchanges are established.  The market apparently gleaned from the hearings that PPACA would survive the challenge.  I heard otherwise.  Instead I heard a sensible argument against the mandate, and a less compelling one for it, and while it was hard to read how each was recieved by the court (in particular Kennedy and to some extent Roberts), I'm inclined to think the mandate may well not stand.

So, I'm going to reduce my holding in Wellpoint (I'll have to wait a few days) to closer to 4% of the port.  This is compatible with my desire to continue to increase cash as well given the year to date unexpected success in the portfolio and market in general.  I've not tended to signal trades before, not directly anway, but am considering doing so moving forward (we'll see - I intend to retain flexibility for as long as I'm not selling anything).

I'll update the port on the change in month, and once I clear the disclosure period.

TMFHelical

Home Coverage Fool

2 Comments – Post Your Own

#1) On March 29, 2012 at 2:59 PM, buylowersellhigh (59.21) wrote:

The theory being that less healthy people will not buy health insurance, thus leaving insurers with the more sick patients that cost more to have on their plans, correct?

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#2) On March 29, 2012 at 3:41 PM, TMFHelical (98.71) wrote:

buylowsellhigh,

Insurers should be fine in the long run.  But a strike down of the mandate (only) will retain the inability to cap policies or deny coverage for pre-existing.  So yes, sick patients will wait to buy insurance until they are sick.

If the entire bill is struck down or retained, the large insurers should benefit.  So my position is contrary to the direct odds, but it is what I felt I heard.  Should the madate be struck down, I think an opportunity for insurers could present itself.

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