Stopping a "train wreck." Caving in to "anarchists." Trying to "extort a president."
Those were the views of House Speaker John Boehner (R-Ohio), Senate Majority Leader Harry Reid (D-Nev.), and President Barack Obama, respectively, on what was then an impending vote by the House of Representatives to defund the Affordable Care Act, commonly known as Obamacare. That vote to fund the federal government without allocating money for Obamacare has now been held, passing 230-189 largely along party lines.
Many say that the House's action was an exercise in futility, since the Senate seems certain to strip defunding Obamacare from the legislation. Even if the Senate went along with the House, President Obama has threatened a veto.
I'll leave all of the political prognostication to others. What I'm interested in is the money flow in the stock market that could kick into gear if funding stops for operations required to support the Affordable Care Act. In other words, where do the funds go if Obamacare is actually defunded?
Give and take Determining which stocks would see mass departure of capital isn't very difficult. All we have to do is look at where the big money flowed after Obamacare was passed and after the Supreme Court upheld much of the law. Where Obamacare gave, defunding of Obamacare could conceivably take away.
What's at the top of the list for probable investor flight? Hospital stocks. Publicly traded hospital chains have sizzled ever since the Supreme Court decision in June 2012. Shares in Tenet Healthcare Corp (NYSE:THC), for example, nearly doubled on hopes that Obamacare would generate more business from insured patients and reduce write-offs from providing care for the uninsured. If the health-insurance exchanges needed for those uninsured individuals to gain coverage didn't have money to operate, Tenet and its peers would undoubtedly lose much of those big gains.
Pharmacy chains have been prominent promoters of Obamacare, in large part because they seek to benefit from newly insured Americans needing more prescription drugs. Walgreen Company (NYSE:WAG) was the first big player to announce efforts to educate customers about the impact of health reform. It's probably no coincidence that the company's stock has soared more than 90% since the Supreme Court's ruling. That major uptrend could easily turn into a downtrend, though, with no money for Obamacare.
Which stocks would be most likely to see money flowing in? Delta Air Lines, Inc. (NYSE:DAL) is one possibility, if the whole law were overturned. A leaked letter from the company to the Obama administration revealed that Delta's health care costs would increase by nearly $100 million in 2014 largely because of Obamacare. That figure amounts to around one-tenth of Delta's total net income last year. Other large employers could also stand to benefit if Obamacare faded away because of lack of funds.