The Supreme Court has confirmed the legality of the Affordable Care Act, commonly known as Obamacare with six justices ruling to uphold the sweeping healthcare legislation and three dissenting.
News that Obamacare will survive may not be met with cheers in some circles but hospital stocks and select healthcare exchange traded funds are soaring on the headlines. Shares of HCA Holdings (NYSE: HCA) are up more than 8% on volume that is already triple the daily average while Community Health Systems (NYSE: CYH) is higher by 10% on turnover that more than five times the daily average.
“A stunning 6 to 3 verdict for the ACA, the administration and people who were poor and previously uninsured, even if Republican as King v Burwell decided for Burwell. Today’s Stock Shock Day. Buy HCA. $89 PT, Tenet Healthcare, $58 PT, but now upside to our best case scenarios are more likely HCA $93; Tenet Healthcare (NYSE: THC) $69.56; LifePoint Health (NasdaqGS: LPNT) $86 and Community Health Systems $68.72 per our Efficient Market Pricing Model. We’re back in business, looking forward to 2Q15 earnings,” according to a Mizuho note posted by Ben Levisohn of Barron’s.
All of that is great news for the SPDR S&P Health Care Services ETF (NYSEArca: XHS), which is up 2.3% today, making it one of the top-performing non-leveraged ETFs to this point in Thursday’s session. XHS has spent plenty of time in the spotlight recently due to rumors of consolidation among healthcare providers, such as Dow component UnitedHealth (NYSE: UNH), Aetna (NYSE: AET), Anthem (NYSE: ANTM) and Cigna (NYSE: CI). [M&A Activity Lifts These ETFs]
However, XHS, as has been previously noted, is intimately levered to the Obamacare trade because the ETF allocates 28% of its weight to healthcare facilities stocks, including some of the aforementioned hospital operators. XHS also devotes 22.2% of its weight to managed care providers. Some investors may not want to hear it, depending on their personal politics, but Obamacare has made those exposures in XHS all the more beneficial. [ER ETF Could Rally Again]