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Michael Gregory, Highland Capital Management, on how investors can profit off of the Supreme Court’s health-care decision, regardless of its outcome...
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-- president Obama's health -- lost so our next guest says there -- -- actually make money no matter which way the court rules.
Joining us now Michael Gregory and runs to health care funds affiliated with highland capital management.
Well -- -- being here because I think a lot of people want to be able to profit on this in don't know which way to -- so basically he had two options.
Obama care -- obamacare loses so let's start with obamacare stays.
Where do my best.
Well I think -- declare winners -- hospitals and commercial and terrorism and let me give you some context -- the -- up.
First thing is is it constitutional to impose an individual mandate to have health care.
And we think that's probably -- a 60% chance that's rejected but more importantly for investors in stocks is what's that linked him.
So to be linked to the whole bill in which case the whole bill is tossed the can be linked to nothing.
In which case just some and it leaves or be linked to certain components actually have to read through the tea leaves and way to see to some extent how things play out.
So if they affirmed -- you're saying by hospitals like that morning.
Yes because a lot of investors are on the sidelines because -- confusion of the trade.
So I think in the -- and there's a reactionary trend setting up.
Hospitals can move around 15%.
If there is an affirmation of the policy and then if Obama stays in the White House.
Hospital stocks move up in excess of 50% I think over the next twelve months laugh and that and that's it just a plan the fact that -- -- more pain patients that come to the hospitals because of you bet hospitals give way around twenty point five cents in free care which is a pretty -- business model yet paid so as a result of legislation and all of a sudden those customers and I paid.
Okay snapped a lot struck down years saying to by the commercial health insurers -- Because health insurers right now have cap margins and as a result of policy.
So if the legislation moves in the other direction they're winners because they're not hit with taxes -- not hit with cap margins.
And I think ultimately that benefits the pricing and therefore the consumer.
The diversified insurance companies -- the one that you're saying that the most to gain if obamacare is overturned companies like Aetna Cigna Coventry health.
Yeah in fact we only see a 10% chance where there's a doomsday scenario for the commercial insurers.
90% probability that it's positive to neutral so that's an area where were set up long.
And now it's a lot struck down the hospital chain's Medicare insures all would get hurt so would you be shorting -- would you sell them how would you play those guys.
See here's the efficacy out of I think if the -- shut down your hospital stocks -- decline -- but your insurance company longs will go up so you're actually neutral.
Now flip side if it's -- your hospital stocks will rip.
Whereas your commercial insurer positions will be neutral so it's out of the -- of a win win in that situation where it's affirmed and no business situation works now but the thing is -- you can't put you can't put this trade on this long short trade really until the day of the decision or can you.
Now you can put it on beforehand but in addition you'll have a reactionary trade after the decision.
So we think the decision is gonna come out probably around the 28 toward the end of the month.
And investors should just have a very clear and clean game plan in place as to what to do when the Supreme Court decision is out.
It's good -- Michael Gregory thank you so much -- investment ideas.
You've --
