Healthcare Stock Could Dodge Political Headwinds

HCA shares have been consolidating atop the 200-day moving average

by Josh Selway

Published on Jul 2, 2019 at 10:13 AM

Healthcare stocks experienced volatile trading earlier this year as political leaders ramped up their push for Medicare for All in the U.S. While this issue could again be thrust into the headlines as the 2020 presidential election heats up, one brokerage firm believes it's identified HCA Healthcare Inc (NYSE:HCA) as a name that can withstand the sector uncertainty.

Specifically, SVB Leerink this morning released a note in which it said it's "very bullish" on the security, though it failed to provide a rating or price target. The firm said any weakness from talk of Medicare for All or drug pricing changes will only be a buying opportunity, calling attention to the company's "balanced capital deployment strategy." Leerink mentioned the announcement yesterday that HCA bought 24 urgent care centers in Texas.

Digging into the data around the healthcare stock, there was heavy put buying during the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), where the shares sport a 10-day put/call volume ratio of 6.08, which ranks in the 94th annual percentile.

However, it appears most of this activity was at the now-expired weekly 6/28 130-strike put. While near-term put open interest still outweighs call open interest based on the Schaeffer's put/call open interest ratio (SOIR) of 1.04, the annual percentile rank of 37% shows this reading is actually less put-skewed than normal. Peak open interest in the front-month July series sits at the 120 put.

On the charts, HCA shares were last seen trading at $133.98, below the $140-$144 region that's acted as a ceiling in the past year, though they're trading right above the 200-day moving average. Most analysts are already bullish, with 15 of 19 handing out "buy" or "strong buy" recommendations.

 


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