Why Hospital Companies' Shares Soared

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of hospital operators Vanguard Health Systems (NYSE: VHS  ) , HCA Holdings (NYSE: HCA  ) , Tenet Healthcare (NYSE: THC  ) , Health Management Associates (NYSE: HMA  ) , and Community Health Systems (NYSE: CYH  ) , soared 16%, 10%, 10%, 10%, and 14%, respectively, following the re-election of President Obama.

So what: As I mentioned earlier in the week, hospitals definitely had the most at stake in last night's elections. President Obama's bill, the Affordable Care Act, is going to make it a requirement for all Americans to carry insurance, which should reduce and potentially eliminate the bad-debt provision that all hospitals currently count as losses for patients who are unable to pay their bill. With Obama's re-election, it seems ever more likely that the ACA will go into effect in 2014 without a hitch.

Now what: I'm not sure I'd chase after hospital stocks after a big rally like the one we're witnessing today, but it's definitely another step in the right direction for the sector as a whole. None of these companies is particularly expensive on a forward earnings basis, but it's going to take some time to remove those bad losses from hospitals stocks' bottom-line results, so keep your expectations in check.

Craving more input? Add these five hospital companies to your free and personalized Watchlist so you can keep up on the latest news with the sector.


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