Even if a health care reform bill is passed this year, it will take months to figure out all the details in what will likely be more than 1,000 pages of text.
One of the over-riding reasons for health care reform is to slow down the growth in the cost of services and medicine.
Depending on which set of numbers you believe, health care is growing at around three times the rate of inflation.
This growth far outpaces the growth of real income and is threatening to stifle our economy.
One would think that with all of this growth, health care companies would be gold mines for investors.
Some companies have done well, but the overall sector has lagged for at least the past five years.
According to figures from Morningstar.com, the health care sector has not lead in any period longer than three months.
Health care ranked number 10 out of 12 sectors when measured by total return in the three and five year measurements.
With that difficult record, what should investors be looking for as possible opportunities in the unfolding health care drama?
Without knowing exactly what the reform bill will cover when finally signed it is hard to be specific. However, here are some possibilities:
- Look for software companies that provide electronic medical record solutions, especially to mid and small sized hospitals and clinics.
- If a public option is not in the reform bill, insurance companies may do well.
- Pharmaceutical companies with products that offer alternatives to surgery or other costly treatment, especially for chronic diseases, heart disease, diabetes and cancer.
However, when all is said and done we may end up with a reform bill that is basically business as usual in which case previous market leaders will likely be your best choice.