Healthcare stocks rally as Bernstein says Trump win will benefit MCOs

Investing.com -- Certain healthcare stocks, especially managed care organizations (MCOs), are rallying following Trump’s victory in the U.S. presidential election.

Names such as Cigna Corp (NYSE:CI ) (+1.3%), UnitedHealth Group (NYSE:UNH ) (+5.7%), Alignment Healthcare (3.4%) and Humana (NYSE:HUM ) (+9.9%) have all made strong gains.

Bernstein analysts see the Trump win and a likely Republican-controlled Senate as beneficial for MCOs and particularly Medicare Advantage (MA) providers.

“We see the Trump victory as positive for MA names and MCOs broadly, with an improved outlook on regulatory and executive actions,” Bernstein analysts wrote.

Medicare Advantage providers such as UnitedHealth Group (UNH), Humana (HUM), and Elevance Health (ELV) stand to gain the most from favorable policies expected under Trump, according to Bernstein.

They explain that the potential for stable or enhanced MA rates under the Trump administration makes these stocks attractive, particularly as the president’s health policy agenda may not prioritize disruptive reforms in 2024.

For Medicaid-focused companies like Centene (NYSE:CNC ), however, the impact is mixed and dependent on the composition of Congress. If Republicans also secure control of the House, Bernstein foresees “modest downside” pressure on Medicaid names due to possible Medicaid reform, such as shifting to block grants or reducing state funding.

On the other hand, they note that a Democrat-controlled House could be supportive of Medicaid stocks by increasing chances of compromise on public exchange subsidies and Medicaid policy.

Beyond MCOs, drug pricing reforms could continue, but Bernstein suggests they may rely more on “tariffs, penalties, and other structures” rather than sweeping changes.

With healthcare policy not projected as a top priority, Bernstein says the Trump administration’s focus is likely to shift toward other areas, including immigration, inflation, and tariffs, which could allow MCOs and MA providers to operate with fewer policy disruptions.

Source: Investing.com