Now that all the key deadlines for Obamacare have finally taken effect, a lot of tech investors are busy trying to figure out how this will affect their portfolios.
It's easy to see why. This is the largest and most fundamental change to hit the healthcare sector in decades.
Not only that, but Wall Street is currently trying to pick the winners from the losers – and frankly isn't doing a particularly good job of it.
Fact is, Obamacare is at least partly responsible for some of the biotech sector's recent sell-off…
The Government Hammer Falls on Biotechs
For example, industry analysts recently cited the impact of a letter sent last month by several House members questioning the price of a blockbuster drug used to treat hepatitis C.
The issue was the cost of Sovaldi, a drug sold by Gilead Sciences Inc. (Nasdaq: GILD). Solvaldi costs $84,000 a year but is a godsend to patients because it helps prevent the need for a liver transplant that costs some $250,000 – assuming you can find a donor organ.
That missive roiled the biotech sector because many investors feared politics in advance of the mid-term elections might affect other medical technologies.
I think that's a classic overreaction in a jittery market. But it does bring up a very important point.
What investors really need to look for are stocks that are what I call "Obamacare-proof."
By that I mean we need to find companies that will profit over the long haul whether Obamacare remains in effect or not.
Let's assume for the moment that the Republicans hold the House and take the Senate this November and capture the White House in 2016. And let's further assume they gut the Affordable Care Act.
Even in that scenario, there is one sector that will continue to do well. The reason is that we'll still need a key piece of technology that can help rein in rising healthcare costs no matter what the political landscape looks like.
That's why an area broadly defined as healthcare information technology (IT) services will continue to play a crucial role in America's future.
So, today I want to examine this sector in some detail. First, I want to look at examples of new IPOs in the space. Then, to give you a heads up on long-term profit plays, I'm going to identify two promising startups on an IPO track.
And then I'll conclude by identifying what I think is one of the better Obamacare-proof stocks out there today.
So let's get started by looking at those two recent health IT public offerings.
Public Offering No. 1
Enterprise Healthcare Software
Castlight Health Inc. (NYSE: CSLT) is a leader of enterprise healthcare software. It operates a web platform that assists patients in understanding various aspects of their healthcare benefits, including coverage, costs, and preferences.
Founded in 2008, the San Francisco-based company's March IPO was one of the more highly anticipated new issues so far this year. It did not disappoint, quickly jumping almost 150% to around $40 a share, and raising $178 million.
Leading up to its market debut, the stock had a series of price upgrades, but eventually landed at $16 a share. At its peak, the stock's market cap was around $3 billion.
No doubt, it has given up nearly all of its gains during the tech sector's retreat. But at deadline it was still trading above its entry price and poised to go higher.
About the Author
Michael A. Robinson is one of the top financial analysts working today. His book "Overdrawn: The Bailout of American Savings" was a prescient look at the anatomy of the nation's S&L crisis, long before the word "bailout" became part of our daily lexicon. He's a Pulitzer Prize-nominated writer and reporter, lauded by the Columbia Journalism Review for his aggressive style. His 30-year track record as a leading tech analyst has garnered him rave reviews, too. Today he is the editor of the monthly tech investing newsletter Nova-X Report as well as Radical Technology Profits, where he covers truly radical technologies – ones that have the power to sweep across the globe and change the very fabric of our lives – and profit opportunities they give rise to. He also explores "what's next" in the tech investing world at Strategic Tech Investor.