5 Surprising Losers of Obamacare

Last Thursday, the Supreme Court upheld the constitutionality of the Patient Protection and Affordable Care Act (aka Obamacare) and forever changed the landscape of the health-care sector. In the time leading up to that momentous decision and immediately following the ruling, we at The Motley Fool have hit every angle of how this could affect health-care stocks and your wallet.

In a further attempt to understand the reach of Obamacare, on Friday I proposed five stocks outside of the health-care sector that could see significant benefits from health-care reform. Today, I want to look at the other side of the coin and discuss five non-health-care companies that could see their businesses weaken directly as a result of Obamacare.

One of my main arguments Friday was that as Medicaid coverage expands and people are required by law to carry insurance, more of them will choose to get annual checkups and utilize the medical care available to them. In doing so, quite a few of these newly insured individuals will adopt healthier living habits. Today's batch of five surprise underperformers are companies I suspect will be negatively affected by that movement toward healthier living.

Altria (NYSE: MO  ) and Reynolds American (NYSE: RAI  )
No one really "likes" the tobacco sector, but tobacco stocks provide investors with bountiful dividends and have a customer base that's nothing short of addicted to their products. As I've pointed out on numerous occasions, the Food and Drug Administration and the Centers for Disease Control and Prevention are waging war against tobacco companies through advertising campaigns, ingredient transparency requests, and warning label laws that could all negatively impact Altria, Reynolds American, and other U.S. tobacco companies.

However, nothing will be more damaging than Obamacare, which will give millions of people access to medical care that will include medications that will enable them to get off tobacco products. Altria and Reynolds have already warned of sizable layoffs in response to declining cigarette volumes, and Thursday's ruling has the potential to slowly erode a customer base that has been either flat or declining for decades.

Monster Beverage (Nasdaq: MNST  )
I believe I just heard the collective groan of millions of college students across the U.S. I am by no means trying to lump energy drinks in with tobacco products in terms of health effects, but there are scientifically proven negative long-term effects on your cardiovascular system for those who regularly consume energy drinks, at least according to the University of Washington.

Unlike a tobacco addiction, where insurers would likely provide medical coverage to help a person kick their habit, no such coverage exists for energy drink addiction. And last I checked there's no such thing as an "energy drink intervention." Instead, this is a simple case where healthier eating habits derived from getting an annual checkup could kick in.

That could be bad news for Monster Beverage, which derives about 95% of its revenue from energy drinks and now commands 30% of the convenience and gas-station store energy drink market (just shy of Red Bull's market-leading 32% share). Coca-Cola could also share in the pain if energy drink consumption falls, but unlike Monster, it has a diversified line of carbonated and noncarbonated beverages to fall back on.

McDonald's (NYSE: MCD  ) and Burger King (NYSE: BKW  )
Whereas I proposed Whole Foods Market as a potential beneficiary to Obamacare as people make the choice to eat healthier, fast-food restaurants McDonald's and Burger King could, in turn, see sales slump unless they continue to drastically alter their menus and load them with more nutritious options.

McDonald's has actually made good strides in introducing salads and healthier wrap options to its menu. In fact, it's the golden standard (pun completely intended) on which fast-food restaurants have based their healthier options. Burger King, which is vastly behind the times and struggling mightily in the U.S., only recently introduced a wider variety of healthful food options to its menu that is, by all accounts, nearly a carbon copy of what McDonald's offers.

Although fast-food companies have received the hint to move toward offering healthier options, Obamacare may force them to pick up the pace or face nasty repercussions as people change their eating habits.

Foolish roundup
As you can tell from our continuing coverage on how Obamacare will affect your medical care, your investments and your bottom line, its reach goes far beyond the health-care sector. My advice would be to add these five companies to your free and personalized watchlist to track their progress leading up to, and after, the enacting of Obamacare in 2014.

With U.S. elections around the corner, our team of analysts at Motley Fool Stock Advisor realizes there's more at stake for stocks than what we're witnessing in the health-care sector. Find out in our latest special report which stocks could benefit from the result of the 2012 presidential election. Get your free copy!

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool owns shares of Coca-Cola, McDonald's, and Whole Foods. Motley Fool newsletter services have recommended buying shares of Monster Beverage, Coca-Cola, McDonald's, and Whole Foods. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that never takes a sick day.


Read/Post Comments (15) | Recommend This Article (10)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 02, 2012, at 3:03 PM, JohnCLeven wrote:

    How will Obamacare force McDonalds to healthier options? If anything, Obamacare subsidizes poor eating habits. Also, Obamacare may cause Americans to have less money, therefore increasing McDonald's sales. Sounds like Mickey D's wins again!

  • Report this Comment On July 02, 2012, at 5:40 PM, topbeancounter wrote:

    with a bit of luck, the real loser in all of this, in spite of having a increased market, may be the insurance companies once they are forced to compete for business, assuming that ever happens. Even the govenator in California, before he was termed out, set in motion the outline of the insurance exchange. Let's hear it for competition among those buggers!

  • Report this Comment On July 02, 2012, at 6:03 PM, xetn wrote:

    I think the number 1 loser of Obamacare is the citizens who are being forced to purchase something that most do not want. But you do have a choice: pay or pay. You can either pay insurance premiums or a tax (fine) for not purchasing.

    It seems the only outs are to become a politician or a union worker. This "product" is so great that the politicians and union members are opted out. And, since this is an act of monopoly, premiums are sure to head much higher.

    How is that for a democratic solution in the "home of the free"? Didn't we start a revolution because of the imposition of a 1% tariff on tea or something by the king of England?

  • Report this Comment On July 02, 2012, at 6:55 PM, Zombie111 wrote:

    In reply to topbeancounter, I sugest that countries with a universal taxpayer funded health care system provide competition with insurance companies, which have to offer a reasonably priced alternative with points of difference such as no waiting list in order to entice people to pay.

    Given the huge amount of money spent on health care in the U.S. (around 18% of GDP cf compared to under 10% countries like Canada and Australia, with similar quality of care), it seems as though the U.S. citizens are being ripped off. Given the size of the population, one would expect big economies of scale.

    I am not sure if the changes will entice people into healthier lifestyles.

  • Report this Comment On July 02, 2012, at 8:03 PM, TMFVicki wrote:

    One can only hope that having access to better healthcare will make the US healthier. According to T.R. Reid's The Healing of America - A Global Quest for Better Cheaper, and Fairer Healthcare the US ranks 24th in the world for Healthy life expectancy. The top 3 are Japan, Australia and France.

  • Report this Comment On July 02, 2012, at 8:55 PM, skypilot2005 wrote:

    On July 02, 2012, at 8:03 PM, vicki1024 wrote:

    "One can only hope that having access to better healthcare will make the US healthier. According to T.R. Reid's The Healing of America - A Global Quest for Better Cheaper, and Fairer Healthcare the US ranks 24th in the world for Healthy life expectancy. The top 3 are Japan, Australia and France"

    Obama Tax, aka Obama Care, does not guarantee access to “better Health Care” for most Americans.

    It will surely result in longer waiting times for treatment because; it does nothing substantially about increasing the number of Doctors and other Health care professionals.

    Furthermore, it will not decrease the rate of Health Care costs because it lacks tort reform and discourages medical innovation.

    As I stated earlier, A good analogy maybe looking at United Parcel Service verses The Post Office.

    Looking at the average customer wait time between the two is eye opening.

    Sky

  • Report this Comment On July 02, 2012, at 9:03 PM, SuntanIronMan wrote:

    If you think domestic fast-food is the loser of Obamacare, maybe investors should look internationally with something like ARCO.

    Same with the tobacco names with something like PM.

  • Report this Comment On July 02, 2012, at 9:34 PM, PDG2025 wrote:

    Your logic rests on the assumption that providing insurance coverage will ensure healthy lifestyles. Though I wish this were true, it is not. There is an obesity epidemic in the US with no decline in sight. This is due to inexpensive fast food and lack of exercise. Even with annual physical exams, people do not utilize these and usually ignore instructions for healthy lifestyles. The US healthcare system tries to respond to worsening health lifestyles. PPACA will have a marginal impact on this.

  • Report this Comment On July 03, 2012, at 1:57 PM, funspirit wrote:

    I hope you are right, but I doubt it. People already know what's bad for them, but act in what they believe will give them immediate gratification. However, I do appreciate your attempt at logic. (no sarcasm, even if I disagree at least you are thinking form a different angle)

    I believe obesity will clog our health system. There is no doubt in my mind, fatties should have to pay higher premiums much like risky drivers do.

  • Report this Comment On July 03, 2012, at 2:12 PM, mtf00l wrote:

    Let's go after the cheap, high calorie, fast food industry like we went after the tobacco industry. Let's not stop there let's go after the frozen food market that does the same thing. Empty calory ,eals to hit a price point to make profits without consideration to the contributions they're making to obesity.

    Once they have to start paying for the obesity health care they might start serving 'real' food. Or perhaps at a minimum we can get warning labels on those foods that contribute to obesity.

  • Report this Comment On July 03, 2012, at 4:59 PM, xetn wrote:

    mtf001:

    Yeah, lets condemn the companies and not the purchasers, because they are just too stupid to know better than to eat all that rotten food.

    This is the same stupid logic aimed at drug users, people forced to wear seat belts or get taxed (er fined). The so-called war on drugs, which used to be perfectly legal, is nothing more than a method of confiscating assets from "suspects" without due process. And the big downside is it has created all the drug cartels, just like prohibition did in the 20s and 30s led to bootlegging.

    Those companies are selling the kind of food the consumers desire or they wouldn't sell it.

    Your logic is illogical.

  • Report this Comment On July 03, 2012, at 5:43 PM, sheldonross wrote:

    Another article, another day, another Altria bash... where's the next record button?

  • Report this Comment On July 04, 2012, at 9:03 PM, woodNfish wrote:

    Actually, the biggest losers are us, the people who have to pay for this crap. Of course I don't expect anyone at Motley Fool to state that fact. After all you are the same idiots that think wind and solar and alternative fuels are great investments. I expect none of you have never seen a government program you didn't like.

    I find myself paying less and less attention to your recommendations because of that. Pretty soon I may decide to stop paying for them too. Think about that.

  • Report this Comment On July 07, 2012, at 8:50 AM, Fray75 wrote:

    Dear woodNfish, If you disagree with the logic, fine. If you do not want to take the investment advice, fine. What is up with the nasty, personal attacks. Do you imagine these guys are sitting at home biting their nails just hoping you'll take their every piece as gospel? I wouldn't be. I'd be laughing at your hate filled rhetoric every time you ignore investment advice that turned out well. In fact, I would throw a party with all the money I made from it in honor of you and those like you. It's about the money. PERIOD.

  • Report this Comment On July 11, 2012, at 11:00 AM, Raffles990 wrote:

    This is in response to the dismissal of MNST in this article. Monster/Hansens is not a one trick pony. It supplies juice drinks to the California school system (cash cow). It owns Hansens and Blue sky which occupy a large space on the racks of WFM and many other natural drinks carrier. It competes from vitamin water to energy and has great increasing distribution and placement from WFM to 711 to gas stations. It has grown because it has smartly innovated in space where Pepsi and Coke failed to innovate. This company should not be underestimated.

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