Health plan and drug stores are getting left out in the incredible Q1/2019 stock market rally. The DOJ’s move to strike down the Affordable Care Act and post-Congressional testimonies related to drug pricing soured the market’s sentiment for this sector.
It will take a shift in sentiment before stocks like CVS (NYSE:CVS), Cigna (NYSE:CI), and Walgreens (NASDAQ:WBA) recover. Rite Aid (NYSE:RAD), whose shares will reverse-split, might get left out due to company-specific uncertainties.
The DOJ wants to strike down ObamaCare. This spooked investors on March 25 and its uncertainties for the hospital and health insurer markets. By siding with a Texas federal district court’s ruling that ObamaCare is unconstitutional, investors sold off CVS, CI, and WBA stock.
Taking away health-care will lower the subsidies insurance companies enjoyed. And the government scrutiny over drug pricing could further erode profits for all health care plays, including drug stocks.
If this health-care plan is to gain traction on reform, the government needs an alternative for citizens. It needs a balance between taxpayer-funded health care and affordability for those buying a plan. This could prove tricky, so the longer this is unresolved, the longer these stocks underperform.
Investors buying into the selling could average down and sell option calls to improve the average stock price paid.
