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Hospital Stocks Are Heading Higher. So Are Covid-19 Cases

The health-care business sees gains as the Covid-19 situation worsens.
(Spiroview Inc)
(Spiroview Inc)
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Hospital stocks are rising, leaving investors less concerned with Covid-19 hospitalizations reaching all-time highs and straining health-care facilities across the United States, WSJ reports.

Publicly-traded hospital systems ended November by posting their best performances in months, including Tenet Healthcare Corp. and HCA Healthcare Inc., which both improved by at least 21%.

  • For context, both surpassed the “S&P 500’s 11% monthly gain and the 7.8% rise for the index’s health-care sector.”

The stock market has been on a “wild ride” of late. Covid-19 vaccine results, coupled with the resolution of the presidential election, have aided U.S. stock indexes to “new records as traders scrambled to scoop up investments that have been beaten down this year.”

  • The boom in hospital stocks could be investors “bargain-hunting” as Tenet and Universal Health Care Services Inc. are both still more than 10% below their 2020 highs.
  • Some analysts and investors think the rally could extend beyond November, even in a world with Covid-19 pushing hospitals to their respective limits.

It’s all about clarity going forward: With Georgia headed to a runoff Senate election, the likely divided government reduces the chances of a “major health-care overhaul.” Factor that in with the latest survival prospects of the Affordable Care Act and hospital and health-care facilities have a cause for optimism from an investing perspective.

Looking Ahead: Still, Covid-19 remains a crucial concern, and cases could surge even further due to the Thanksgiving holiday. Hospital systems are likely better prepared for the influx this time around, but the sheer volume could “overtax” the facilities.

  • The Covid Tracking Project: 135,000 new U.S. daily cases on Sunday, and hospitalizations surged to 93,000.

The Bottom Line: “Investor sentiment on hospital companies and the overall health-care sector remains positive.”

Justin Oh:

I am bullish generally on the healthcare sector and will do some searching within the space to see if there are good plays here. Unfortunately I think high-cost hospitals have long-term headwinds after the pandemic and isn’t a place I’m especially interested in parking our money in. 

I, like many institutional healthcare investors, believe that the opportunities lie in companies that will drive down the overall cost of care and help shift towards value-based purchasing. This means that there will be winners in healthcare technology, post-acute services, and managed care.

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