As any investor who owns Healthcare (XLV) can tell you, it’s been a tough ride this year. In fact, the Healthcare sector is the single worst performing sector in the S&P 500. And we think the outlook is only going to get worse.
In the excerpt above from The Macro Show, Hedgeye Healthcare analyst Andrew Freedman and CEO Keith McCullough respond to a subscriber’s question about the best short in all of Healthcare.
They both agreed on Cerner (CERN).
Here’s why.
Cerner has been a massive beneficiary of the Affordable Care Act, more widely known as Obamacare. As a provider of electronic health record (EHR) software to the healthcare industry, Cerner enjoyed an historic demand for its products as ACA pulled 25 million newly-insured healthcare consumers into the marketplace.
That surge in demand is beginning to wane. It will hit a wide range of healthcare companies’ financial results during coming quarters (our healthcare team coined a term for this which they call #ACATaper). CERN’s financial results, in particular, will be severely challenged going into 2017.
“It’s really setting up to be a pretty big disaster heading into 2017,” Freedman says. “This is the ACA Taper on steroids.”
Watch above as McCullough and Freedman dig deep into the macro and micro implications of the ACA Taper.
