Ryan Cole, The Investment U Research Team
If there’s one subject that has a hysterical debate surrounding it, it’s healthcare.
The right is accusing the left of euthanizing little old ladies. The left is accusing the right of coldly killing the poor. And somehow poor Stephen Hawking would be dead if left to the evils of Britain’s National Health Service – which just happens to be the health service that has kept Hawking alive all these years (yes, he’s a Brit).
Nothing like a good political debate to bring out the hyperbole in people. And, like anyone else, I can enjoy a hysterical joust as much as the next guy – red-faced with the rightness of my position (whatever that position happens to be).
But, that’s got nothing to do with investing. Politics is emotion, with reason used to fill in the details afterwards.
Invest emotionally, and you’ll soon go broke.
Investing is reason first and foremost, with emotion the greatest enemy of the good investor. Get too high with the wins, or too low with the losses, and you wind up acting like a gambler, not a businessman.
That’s why, when it comes to healthcare, I’m checking the debate at the door. Just the facts, here.
What’s Really Going On?
The Healthcare bill isn’t in a final version – and there’s still a lot of haggling to go through. But, almost certainly, something will pass this year. The Obama administration is putting everything behind this – unless some unexpected catastrophe steals the spotlight, a health bill will be hammered out by year’s end.
And we can get a pretty good idea what that bill will look like, if we listen quietly instead of shouting loudly. A good place to start is here – a comprehensive examination of the two Senate proposals, the House proposal, and Obama’s healthcare vision as stated in February (he’s already bent on a number of issues, like the public insurance option).
If you read the bills, you’ll see, we’re not talking about the end of the American healthcare system. In fact, it’s not going to change nearly as much as either side would have you believe – most of the bill is about efficiencies, and expanding insurance options for the uninsured.
There are a few new proposed regulations – like insurers won’t be allowed to drop sick people from coverage, and the lifetime caps on insurance money received are probably on the way out – but this isn’t socialized medicine.
In fact, many sectors of the medical industry are going to get a lot richer.
Healthcare Winners
Pharmaceutical companies are over the moon about this bill, and, according to Dick Armey, they’re spending $150 million lobbying to get it passed.
Why? Because they see a lot of uninsured folks about to get insurance – and that will mean 50 million new customers, in one of the richest countries of the world, all hitting the pharmacies overnight.
There will be other winners in the healthcare bill – and we’ll talk more about them as a finalized version comes closer to being – but you can be sure, any bill is going to be a windfall for Big Pharma.
That’s why we recommend picking up shares of our favorite pharmaceutical company, Novartis (NYSE: NVS). It’s cheap – actually down almost 8% so far this year, with a P/E under 14. It pays a nice dividend near 4%. It’s earnings are still extremely healthy – at $3.31 a share. And it’s going to be one of the biggest winners when the healthcare bill gets passed.
So, feel free to say anything you like at townhall meetings. Just remember to pick up some shares of Novartis during quieter moments, as well.
Good investing,
Ryan Cole
