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By Jeremy Glaser and Alex Morozov, CFA | 11-07-2012 12:00 PM

Finding Value in Health Care After the Election

Tuesday's election eliminated some uncertainty around health-care reform, but the market is still undervaluing several firms in the sector, say Morningstar's Alex Morozov and Matt Coffina.

Jeremy Glaser: For Morningstar, I'm Jeremy Glaser. What impact will the election have on health-care stocks? I'm here today with Alex Morozov and Matt Coffina to take a look.

Gentlemen, thanks for joining me today.

Alex Morozov: Thanks for having us.

Glaser: So it seems like, when it comes to health-care reform, we've had a lot of barriers to wondering exactly how much could get implemented, first with the Supreme Court's decision, and secondly was what would happen with this election. But now it seems that with the Democrats keeping the White House and the Senate that the bill will probably be implemented as written. What impact do you think that's going to have on the health-care industry?

Morozov: Well first things first. The election was pretty much all about status quo. So the Affordable Care Act gets passed, the individual mandate gets upheld. So now everybody who has any kind of interest in the health care now can just look at it and say, "OK, what's next?" We finally went beyond the uncertainty over the reform's fate, and we are now looking at the fundamentals of the industry and how they're going to change following the reform.

We've thought that all along Obamacare is not going to have a significant impact on our valuations across the sector, our takes on the fundamental positions of companies within the sector, and our takes on competitive advantages within the sector. But there are a few instances, a few minor may be marginal changes that we are making to some of our assumptions. Nothing, however, is material to our overall take on the sector. So, I guess the summary is Obamacare now is going to be a law, and the companies in the health-care industry that had a couple of years to prepare for it are now going to look at it and say, "Well this is a certainty. So now what?"

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