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Can a Divided Congress Boost Healthcare Stocks? 4 Picks

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A split Congress coupled with new trends in biotechnology and implementation of emerging technologies in healthcare could have been the reasons behind the healthcare sector’s continuous gains this year. Despite the U.S.-China trade war’s off-putting effect on the other sectors, U.S. healthcare has gained remarkably.

Therefore, it would be prudent to invest in a few healthcare stocks to gain from the factors boosting the sector.

Divided Congress is a Tailwind for Healthcare Sector Growth

While there are many factors pushing healthcare stocks to gain prominence at present, the role of different parties in the House and Senate is unprecedented. A divided Congress could prove beneficial because it would prevent any fundamental changes in healthcare laws.

Ultimately, it would result in the continuation of Obama-era healthcare policies. This means that the Affordable Healthcare Act is here to stay. With Democrats gaining control of the House of Representatives, more than half a million low-income individuals would gain medical insurance coverage. This would largely be an outcome of expansion ballot initiatives and key gubernatorial victories.

U.S. Healthcare Sector Faring Well

The Health Care Select Sector SPDR (XLV) has gained 10.3% on a year-to-date basis, which can be deemed impressive given the downward trend in other major sectors such as energy and finance.

In addition, national spending on healthcare rose 3.9% to $3.5 trillion, increasing for a second year in 2017, per a U.S. Centers for Medicare and Medicaid Services report earlier in December.

The number of new job creations also increased the most in healthcare in November than in any other sector, adding new roles in hospitals and ambulatory healthcare services. This is indicative of the fast growth that the sector is encountering, favored more by increased spending.

Stocks to Buy

Given the positive outlook for healthcare stocks, we have handpicked a couple of HMO stocks from the sector that carry a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Molina Healthcare, Inc (MOH - Free Report) provides Medicaid-related solutions to low-income individuals and families.

The company’s expected earnings growth rate for the current year is more than 100% compared with the Zacks Medical - HMOs industry’s projected rise of 20.2%. The Zacks Consensus Estimate for the current year has increased 2.7% over the last one month. The stock sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Anthem, Inc. functions as a health benefits company in the United States. The company provides a wide range of network-based managed care health benefit plans to individuals, large and small group, Medicaid, and Medicare market segments.

The company’s expected earnings growth rate for the current year is 30% compared with the Zacks Medical - HMOs industry’s projected rise. The Zacks Consensus Estimate for the current year hasn’t changed over the last 30 days. The stock carries a Zacks Rank #2.

Humana Inc. (HUM - Free Report) ,along with its subsidiaries, provides healthcare services.

The company’s expected earnings growth rate for the current year is 23.3% compared with the Zacks Medical - HMOs industry’s projected rise. The Zacks Consensus Estimate for the current year has advanced 0.4% over the last month. The stock carries a Zacks Rank #2.

WellCare Health Plans, Inc. offers managed care services for healthcare programs sponsored by government.

The company’s expected earnings growth rate for the current year is 29.2% compared with the Zacks Medical - HMOs industry’s projected rise. The Zacks Consensus Estimate for the current year has advanced 1.4% over the last two months. The stock carries a Zacks Rank #2.

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