Election is over!
Investors should look for health care stocks which have been severely marked down by the campaign of the losing side. Hillary Clinton has been critical of drug price hikes and the iShares Nasdaq Biotechnology ETF (IBB) has been tumbled more than -35% since her campaign started August 2015. Since the Election Day, her loss of the presidency turned into a 16% gain for IBB. Similarly, Dynamic Pharmaceuticals ETF (PJP) has recovered +10% from its -45% loss. US Pharmaceuticals ETF (IHE) has risen +16% from -40% loss. There seems plenty of upside remaining for these badly beaten pharma ETFs.
It is the same story at the stock level.
United Therapeutics (NYSE: UTHR), ACADIA Pharmaceuticals (NASD: ACAD), Portola Pharmaceuticals (NASD: PTLA), Alexion Pharmaceuticals (NYSE: ALXN), Ultragenyx Pharmaceuticals (NASD: RARE) were all on the same boat. On average, they have been down somewhere between 30-50% and have only recovered around 10-20% since November 9. Since their business models and numbers of drugs at different phases have not been changed before and after November 9, it is reasonable to assume that there are still more returns for investors to grab.
As for the stocks for the winner of the election, the risk premium is being “taken out” and the uncertainty has been reduced. Before November 9, Trump’s threat on repealing Obama Care has put the hospital facility industry ETFs, such as Vanguard Health Care ETF (NYSE: VHT), iShares U.S. Healthcare ETF (NYSE: IHI), and iShares U.S. Healthcare Providers ETF (NYSE: IHF) into more than -20% downward spirals.
After November 9, his reconciliatory tone on the “revising,” rather than “repealing” the Obama Care, has “revived” at least 10% returns of such ETFs. Similarly, hospital facilities stocks, which were on Trump’s hit list, like AmSurg Corp (NASD: AMSG) and HCA Holding (NASD: HCA) both were suffered from more than -40% loss from the recent highs but have already been staging a +20% comeback.
All elections aside, none of these companies or ETFs has experienced any material changes in fundamentals during this 2-year campaign season, let alone on the Election Day.
We should return to the basics.