(By Rich Bieglmeier) As you can imagine, yesterday's controversial Supreme Court ruling on Obamacare has implications of healthcare stocks. Based on Wall Street's reaction, healthcare providers are the biggest winners.
On an ugly red, down day (yesterday), iShares Dow Jones US Healthcare Provider (IHF) is bucking the trend. IHF is up more than 1% on a day when the indexes have chopped off more than 1%.
Inside IHF's portfolio, iStock finds 11 stocks that are up more than 5% on the day. The names include:
HMS Holdings Corp.
)HCA Holdings, Inc.
)Team Health Holdings, Inc.
)WellCare Health Plans, Inc.
)Health Management Associates Inc.
)Community Health Systems, Inc
)Universal Health Services Inc.
)Tenet Healthcare Corp.
)Molina Healthcare Inc.
)Lifepoint Hospitals Inc.
Once again, using the stock charts as our guide, Community Health Systems, Inc.
) would be our top pick from this list. With the exception of Team Health Holdings, Inc
), Community Health Systems was already behaving nicely prior to John Roberts' deciding vote.
CYH was trending higher and pressed against resistance near a multiple pivot highs a little shy of $26. Yesterday's surge in price and volume smashed through the ceiling with force. However, we would like to see the stock settle back, closer to $26 before hopping onboard.
Once again, using our measuring sticks, the specialized hospital healthcare services provider's stock appears reasonably valued. Compared to the industry, CTH trades at a minor discount based on its P/E of 11.41 versus the average of 12.60. A bigger discount can be had on a price to sales basis. Community shares are valued at 16 cents for every dollar per share in revenues, significantly lower than the peer group's 0.63.
With the healthcare ruling in, analysts are likely to lift eps for 2013 and beyond. As it stands now, Wall Street thinks the company will earn $3.99 next year or 9.30% bottom line growth; which provides potential investors another discount when placed next to a forward P/E of 6.76.
Whether you agree with the Supreme Court's decision or not, it is investors' job to figure out how to profit from it. iStock thinks Community Health Systems, Inc. (CYH) could be a good start.