We’ve made this point, but Citi analyst Gary Taylor (who covers hospital stocks) lays out nice and easy why the Florida ruling is a distraction regarding the repeal of Obamcare:
Two Republican-appointed federal judges (in FL and VA) have
overturned the healthcare reform law. Two Democrat-appointed federal judges
have upheld the law. These party-line court decisions foreshadow what we think is
a more imminent risk to the new law, a plausible path towards congressional
repeal. If the Republicans gain a simple majority in the Senate (5 seats) in 2012
AND if a Republican president is elected in 2012, THEN the Republicans’ likely
first order of business in January 2013 would be a repeal of the law (simple
majority to pass in a budget reconciliation manoeuvre, control of the White House to
avoid a presidential veto).
And in terms of stock ramifications, well…
Outlook — The current absolute valuations of hospital stocks clearly do not
account for significant positive call optionality from expanded insurance coverage.
If it becomes clear in 2012 that President Obama will be re-elected, the plausible
route to repeal will be closed and hospital valuations are likely to move higher. If it
becomes clear in 2012 that a Republican challenger will win the White House,
we’d expect some temporary selling pressure in the hospital stocks as some
investors abandon the expanded coverage thesis. We do not expect the debate to
materially influence hospital valuations during 2011.
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