Posted on 11/02/2004 10:04:46 AM PST by SierraWasp
Election hopes spark health stock rally
By Laura Gilcrest, CBS MarketWatch Last Update: 12:44 PM ET Nov. 2, 2004
WASHINGTON (CBS.MW) -- An Election Day health-sector rally Tuesday could be tied to hopes that a perceived "market-friendly" President Bush will keep his job, plus renewed investor optimism over some key health-care firms.
Shares in a multitude of companies among health insurers and pharmaceutical distributors were up several percentage points in morning trading, a few hours after polling sites opened.
The most prominent example was drug distribution giant AmerisourceBergen (ABC: news, chart, profile), which rose $1.40 to $56 in early trading, while pharma supplier McKesson (MCK: news, chart, profile) climbed 59 cents, or 2.2 percent, to $27.31.
AmerisourceBergen got Election Day rolling with a before -the-bell release of third-quarter results. Although the firm's profits dropped due to the loss of a major customer, it still beat Wall Street profit estimates, possibly sparking a "relief rally" throughout the health care segment.
Health insurance giant Aetna's (AET: news, chart, profile) shares jumped $1.06 to $96.91, and health insurer WellPoint Health Network (WLP: news, chart, profile) stock was up 98 cents to $96.50.
Some Wall Street analysts said that the health-care sector has the most to gain from a re-elected Bush administration. Drug distributors like McKesson and AmerisourceBergen plan to switch to a new fee-based business model, a complex process that will take time.
However, for the short term, these firms are still dependent on steady drug price inflation for healthy profits. While inflation rates have been disappointing lately, drug price increases are more likely to pick up under Bush, said David Veal, a market analyst with Morgan Stanley.
"What's good for pharma is good for these guys," he said. But Veal cautioned that drug affordability will pose a significant challenge to whichever candidate takes over in 2005.
With that issue, health firms are again more likely to benefit from Bush. The incumbent, via the health savings accounts, offers a more market-oriented approach to health care, he said.
On the other hand, Kerry will most likely attack the drug affordability problem by opening the door to drug reimportation from Canada, Veal added, which would prove a "clear negative for pharma" -- and drug distributors by default.
Health insurers are also more likely to pull for Bush's re-election, said Matthew Borsch, who tracks health insurance shares for Goldman Sachs & Co.
"The Bush administration is more friendly to private-sector health care," he said.
A GOP victory would especially prove to be a coup for health insurance giants Humana (HUM: news, chart, profile) and PacifiCare (PCR: news, chart, profile), which have large stakes in Medicare managed care, Borsch noted.
On the other hand, companies like Amerigroup (AGP: news, chart, profile) and Wellcare Health Plans (WCG: news, chart, profile) have exclusive Medicaid businesses, so a Kerry victory would probably do more for those firms' bottom line, he added.
The Democratic contender has promised to significantly expand the current Medicaid rolls to cover more uninsured Americans, Borsch said. Of all of Kerry's health care proposals, Medicaid expansion is most likely to become law if the Massachusetts senator takes the White House, he predicted.
Power to the President PING!!!
Yes, but is the rally discounting a Bush win or
simply a CLEAR winner?
Glad I hedged a Bush win! bwahahahahahahahaha
MV
I've been watching the stock market all morning, seems to be seeing a big Bush win...the Nasdaq is over 2000 again for the first time since July....looking good.
I'm going more conservative. 53-45 Bush. If we can hold on to the Colorado and Alaska Senate seats, I predict a 56-43-1 split in the Senate.
Follow the money trail. Money knows and all this about a close election is just the MSM trying for people to tune in ($$$) and not get Dems too discouraged.
Bush in a landslide taking OH, FL, PA and it is over. Early night.
I work in health care and a Bush victory is good for us. If Kerry wins and socializes medicine, they won't be able to afford our expensive diagnostic equipment. They'll go back to using stethoscopes and flashlights.
That's not very conservative. That would be an enormous landslide. Even a 6 pt spread would be an electoral blowout.
So what caused the 2:30est or so drop of about 60 points. The DJI30 is now negative. "Election fears spark market drop"?
Anyone who knows why the market dropped percipitously, let me know, as well.
The wisdom on Yahoo, CBS, etc., is that the bogus Drudge (and GOP) exit poll data triggered the drop (around 90 pts now, DJI30 down 30). I hope someone (with standing) does an investigation. Intentional spreading of rumors can be a criminal offence.
Some times us Considerate Conservatives gits kinda radical!!! It's my prediction and I'm sticken to it! C BS callin electoral at 39 Bush 3 Kerry a few minutes ago, but it's awful early... Hang onto yer hat, cowboy!!!
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