HistoricalPEGuy (65.78)

HistoricalPEGuy's CAPS Blog

The Dems are coming! The Dems are coming!

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January 24, 2007 – Comments (5)

So, I'm not really into healthcare, but the recent announcements of Dems entering the 2008 political race makes me think we are going to have a Dem controlled congress and President. Too much hate for Bush and the corruption that's been seen lately (and probably well deserved).

The Dems #1 issue going into 2008 will be healthcare for all. So I'm looking for plays in that arena and found UNH - highly recommended in the CAPS community. Further investigation reveals nice growth prospects (PEG of 0.9), solid balance sheet, 23% ROE and a focus on minimal administrative costs. With the govement poised to dump an unbelievable amount of money into the healthcare sector, I want a piece of the action! Pharm companies will get screwed. JNJ worries me on this point, although that's only 40% of their biz (otherwise JNJ looks great). I'm not a buyer yet, but I'll be watching it very closely. Its PE is close, but not quite at the lowest its ever been. My finger is on the button....

5 Comments – Post Your Own

#1) On January 25, 2007 at 8:09 PM, Greshm (96.77) wrote:

Hey there H-PEGuy, it's me, Greshm. You were the first person to comment on my first blog entry, thanks. I did reply to you there but I get long-winded and verbose so you might not take/have the time. But I needed to clarify I thought based upon your reaction.

I wanted to comment here on your 'Dems' entry though and say that--maybe not all that surprsingly--I was having similar thoughts about Health INSURANCE stocks with all that 'talk in D.C.'.

Actually, it has been on my mind a bit longer. The 'Governator' in CA (Arnold) made quite a proposal in his State of the State speech early this month. Not sure if you've heard or seen the details on that one. And he, like dubya, has the big "R" after his name. So I don't think we have to wait for ' 08 or a Dem majority. Looks like the pols are almost coming to a majority concensus so change could indeed be in the offing.

My wife is an Employee Benefits Insurance Broker so there is a little 'inside the household' intel here but who knows if that means we're too close to the trees. We'll see.

I'll be doing more research on the details of the CA proposal and what "43" ran-up the flagpole this week and will report back here if you wanna exchange thoughts. At a minimum, I always scrutinize Politician's proposals on 'Health Care Reform' to see if I can handicap what it might mean to my wife's livelihood.

For now, my first-gut impression on each of these major proposals is that the one in CA makes sense and may have a real chance at passage in the State Legislature. My very first reaction to the President's proposal was that once again he seems to have had his mind hi-jacked by someone. But that is as much because I don't believe anything he says and out of ignorance of the details. The initial details I DID hear made this one sound DOA (whereas, in CA, I know of at least one major Carrier CEO who is supportive of the plan).

What would SEEM like a positive that is common to both plans is that they would DRIVE business towards the major National Health Carriers. The CA plan esp. If "43's" isn't done right, it wouldn't necessarily do that but, it might still be really good for the Carriers although it would be catastrophic for a chunk of the citizens and therefore, I think, ultimately all of us (details on that some other day).

I vauely remember during 1993 or 94 how broadly health industry stocks got hammered as the Clinton proposal was being proposed and debated. No signs of that at this point in the Health Carriers it seems. And I think for good reason. These proposals would seem to motivate and encourage greater participation in the private insurance system and it could be argued, subsidize participatioin to some extent. Or, it could also mean that "43's" numbers are so low that everyone is discounting anything he proposes?

But it sure seems like we MAY have reached the nadir in the trend line of what percentage of the population IS insured which means above average "Subscriber Growth" for the Carriers. Whether they can make that profitable will be the big question...

More sometime soon. Greshm

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#2) On January 26, 2007 at 2:01 PM, HistoricalPEGuy (65.78) wrote:

Thanks for the feedback. I'm nowhere near an expert here, but I think health insurers and providers could get a real bolster from a change in our goverments philosophy. I need to do a TON more research before I put real money in.

I forgot to look back to see if you commented on my comments to your blog.

Yes, more sometime soon.

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#3) On January 26, 2007 at 3:09 PM, Greshm (96.77) wrote:

Yeah, as you wrote, "I'm not into healthcare" either. Not an area that has EVER captured my interest. Esp. all the biotech and pharmaceuticals etc. THAT is an area where I marvel @ the analysis and stock-picking of so many of these folks.

As you can probably begin to tell, I'm much more a top-down guy. Identify the trend(s) or change in trend and then attempt to find the vehicles that will win (or lose) from that. Then research the fundamentals of the instruments in the sectors expected to be affected, select the one's to play and attempt to profit from them. I'm doing a bunch of reading on these Healthcare proposals now and will blog-back.

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#4) On January 26, 2007 at 11:30 PM, HistoricalPEGuy (65.78) wrote:

Right on... That's how my whole adventure into oil services happened. "Hey, these stocks look cheap. Maybe I should investigate." I think top-down is the only way to go, unless, of course, you are an industry insider. Thanks for the great blogs on how insurers and carriers might struggle or win with the new health care policy. It'll take me some time, but if the government actually goes the way of universal healthcare, there WILL be some crazy winners out there and I want to find them -- now!

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#5) On February 06, 2007 at 12:36 AM, HistoricalPEGuy (65.78) wrote:

Your sentiment is reinforced by the following statement from a business week article (Friday January 26, 3:07 pm ET

By Joshua Freed, AP Business Writer)

"Meanwhile, Democrats have been more open to major overhauls of the health care system, and even Kennedy's Medicare-for-all idea would amount to a major change. Health insurers could find themselves shut out entirely -- or discover a huge new market among the nation's 47 million uninsured. If the Medicare prescription drug benefit is a model, the government would put up some of the money for the new benefit while consumers pay the rest, and health insurers would handle the paperwork and take a cut"

So what will actually happen? I think the newly elected Dem president will realize that the government doesn't have the infrastructure to manage universal healthcare and rely on private industry. A huge burst of cash injected into providers and carriers. Now just to find out the right ones -- UNH is still looking promising, even if they missed their revenue numbers...

-- HPEguy

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