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By Debbie S. Wang | 07-07-2015 03:00 PM

4 Stocks to Profit From ACA's Next Phase

Merck, Roche, Express Scripts, and LabCorp stand to benefit from an increased focus on cost control and improved outcomes, says Morningstar's Debbie Wang.

Debbie Wang: The first five years of the Affordable Care Act were really focused on increasing accessibility to health care. Now, we're moving into the next phase, which is concentrated on cost control and improved outcomes.

With those two goals in mind, we actually have four names that jump out at us as companies that will benefit in this new phase; the first two are Merck (MRK) and Roche (RHHBY). These are two companies that, in their pipelines, have a number of therapeutic agents that will make a big difference on the quality side, meaning they will deliver better health outcomes. We think those shares are all undervalued right now.

On the other side of the equation regarding cost control, we have two names to highlight. One is Express Scripts (ESRX), which will be wielding its bargaining power in order to bring down drug costs, and the other name is LabCorp (LH), which is also a low-cost producer. As costs come bearing down on hospitals and doctors, we see more and more health-care providers shifting their testing volume over to LabCorp.

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