The fearmongers are having a field day with the notion of the Affordable Care Act (also known as Obamacare) being implemented.
These fears have become so strong that Obamacare’s opponents have effectively shut down the U.S. government since the majority of the law took effect Oct. 1.
The purpose of this article isn’t to argue for or against Obamacare. It isn’t perfect, and it will likely undergo a difficult evolution before being fully implemented. However, in contrast to the political posturing going on in Washington, a group of investors have been booking substantial profits over the past year due to the implementation of the new law.
While some of these profitable avenues are obvious, others remain under the radar of all but the most sophisticated investors.
Obvious names such as hospital operators like Community Health Systems (NYSE:CYH) and HCA Holdings Inc (NYSE:HCA) have seen their shares advance by nearly 50% over the past 52 weeks. In addition, the Health Care SPDR (ETF) (NYSEARCA:XLV) exchange-traded fund (ETF) is nearly 30% higher during the past 10 months.
One of the main reasons for the outperformance of health care and hospital stocks is the fact that revenues will increase for these businesses under Obamacare. More insured people mean more paying clients for health care facilities, hence greater profits. Investors who anticipated this change have booked profits, and there is substantial upside to come in health care-related companies.
One relatively unknown industry that is benefiting in a big way from Obamacare is benefits administration. Benefits administration companies are hired by corporations to manage their employee benefits. All the changes triggered by Obamacare provide this sector with substantial profit-making opportunities — not to mention the fact that all the newly insured will require more companies to outsource their benefits management.
The leading firm in this sector is Wageworks Inc (NYSE:WAGE), a nearly $2 billion provider of benefits management services for corporations. Shares have rocketed nearly 300% since January.
It is estimated there will be 40 million active employees in Obamacare health exchanges by 2018. WageWorks has just more than 2 million clients, representing about 10% of the current market. WageWorks’ services are used by 50% of Fortune 100 corporations and more than 35% of the Fortune 500 names.