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Quarter-End Insights

Our Outlook for Health-Care Stocks

The Supreme Court decision will finally remove the uncertainty overhang and afford investors long-awaited clarity on the sector's prospects.

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  • While hospital admissions are gradually improving, volume from commercial patients is still trailing Medicare, Medicaid and uninsured patient growth, which suppresses the overall health care spending expansion. 
  • The U.S. Supreme Court upheld the individual mandate in a narrow ruling in late June, clearing the main hurdle for the Patient Protection and Affordable Care Act. We had incorporated the anticipated effects of the PPACA in all of our projections, and as a result, the effect of the ruling on our valuations and recommendations across the health-care sector is immaterial.
  • M&A activity is picking up, with several biotech companies receiving unsolicited offers and a merger announced in the fragmented diagnostic field.

 

Alex Morozov has a position in the following securities mentioned above: ICLR. Find out about Morningstar’s editorial policies.

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