Obamacare is here after the Affordable Care Act was signed into law in March 2010. The Act dictates that all Americans, poor and rich, will need to have some form of insurance coverage.
Americans can select the appropriate level for them from the four levels of coverage—bronze, silver, gold, and platinum. The actual coverage in each plan is the same, with the difference being the deductable you have to pay. Moving from the bronze level to the platinum level, the deductable declines but the initial amount paid for the plan increases. Some Americans may be eligible for government assistance, depending on their financial situation, of course.
While Obamacare may seem complicated at first, making money from it is not; Obamacare makes a good buying opportunity.
The end result of Obamacare will be the addition of tens of millions of Americans who previously had little or no coverage to the healthcare system, now having access to basic healthcare. This means the demand for healthcare will increase across the board, providing a good buying opportunity.
Overall, Obamacare will be a positive catalyst for the healthcare sector, which will see demand rise for healthcare goods and services and provide a buying opportunity for healthcare stocks.
Big pharmaceutical stocks, such as Merck & Co., Inc. (NYSE/MRK), Pfizer Inc. (NYSE/PFE), Johnson & Johnson (NYSE/JNJ), and UnitedHealth Group Incorporated (NYSE/UNH), offer a possible buying opportunity, as they will be direct benefactors of Obamacare. Each of these stocks is excellent and is a possible buying opportunity for long-term growth.
If you’re looking for a buying opportunity in a variety of healthcare companies, then take a look at the Health Care Select Sector SPDR Fund (NYSEArca/XLV), which includes key healthcare companies that could rally from Obamacare.
The chart below shows the nice upward move since the start of July.
The top 10 holdings (as of August 30, 2013) in the Health Care Select Sector SPDR Fund are as follows:
Alternatively, if you are looking for potentially higher returns, small-cap healthcare stocks or exchange-traded funds (ETFs) may make more sense for you as a buying opportunity. Smaller companies tend to adjust quicker to changes and may be more domestic, which is great as a buying opportunity under Obamacare.
On the small-cap side, take a look at PowerShares S&P SmallCap Health Care Portfolio (NASDAQ/PSCH) for a possible buying opportunity. Here you have stocks such as Cubist Pharmaceuticals, Inc. (NASDAQ/CBST), Questcor Pharmaceuticals, Inc. (NASDAQ/QCOR), and Align Technology, Inc. (NASDAQ/ALGN).
For some other small-cap stocks that pay good dividends and offer above-average capital appreciation, read “Why Investors Should Look to Small-Caps for Dividends.”