Wednesday, January 20, 2010

Time to Sell Health-Care Stocks?

                                                                  Aetna Inc. (AET)

Barron's - HEALTH-CARE STOCKS seemed to get a late Christmas gift last night in the form of a Republican victory in Massachusetts.

But as stunning as the final result might be coming from the liberal state, the market saw it coming.
The sector rallied in recent days, as a victory by Republican Scott Brown looked increasingly possible. Managed-care stocks were up significantly in the last five days, including 12% for UnitedHealth Group (ticker: UNH), 8% for Aetna (AET) and 7% for WellPoint (WLP). Pharmaceutical giant Pfizer (PFE) was up 7% and medical-device maker Boston Scientific (BSX) gained 5%. All of those returns are well ahead of the Standard & Poor's 500 index's 1% gain over the last week.

Given those impressive returns, we would "sell on the news" today. To be sure, analysts are generally dire in their predictions for health-care reform. "We think the Democratic push for the government takeover of health care is dead or effectively dead," David Maris, a well-respected health-care analyst for Calyon Securities wrote this morning.

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