How to Bet Big Against Obamacare

You can put money on your political beliefs and invest in (or against) the health care law’s success.

NEW YORK, NY - JANUARY 27: Traders work on the floor of the New York Stock Exchange on January 27, 2014 in New York City. Following a drop of over 300 points on Friday, U.S. markets stabilized in early trading January 27, with the Dow Jones industrial average and the S&P 500 up slightly.
National Journal
Clara Ritger
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Clara Ritger
Jan. 28, 2014, 8 a.m.

Think Obama­care is go­ing to fail? Now you can you put your money where your mouth is.

A Sil­ic­on Val­ley start-up called Mo­tif In­vest­ing has cre­ated a way for in­vestors to es­sen­tially bet on the law’s fail­ure: It’s selling an in­vest­ment port­fo­lio full of firms that stand to reap big be­ne­fits if the law is re­pealed or col­lapses in im­ple­ment­a­tion.

It is also of­fer­ing an op­tion for in­vestors of the op­pos­ite per­sua­sion: a re­cip­roc­al port­fo­lio of com­pan­ies that stand to prosper un­der the new health care re­gime.

Mo­tif In­vest­ing used al­gorithms to pick a sub­set of stocks in the in­dex, giv­ing con­sumers who in­vest in Obama­care a cross-sec­tion of the in­dus­tries that will profit from more in­sured Amer­ic­ans and the cost-con­tain­ment pro­vi­sions of the health care law. Con­sumers who in­vest in “Re­peal Obama­care” get a se­lec­tion of com­pan­ies in in­dus­tries that faced big cuts from the law.

The “bet­ting-on-fail­ure” bas­ket of stocks is heavy in­to com­pan­ies that do dia­gnostics, cre­ate med­ic­al devices, and provide as­sisted liv­ing for seni­ors. The pro-Obama­care port­fo­lio is made up largely of phar­ma­cies, hos­pit­als, gen­er­ic drug com­pan­ies, and elec­tron­ic med­ic­al re­cord com­pan­ies.

“There is bi­par­tis­an sup­port around re­peal­ing the ex­cise tax on med­ic­al devices,” said Hardeep Walia, CEO and former Mi­crosoft ex­ec­ut­ive. “So there doesn’t have to be a full re­peal to see a be­ne­fit to some of these in­dus­tries.”

In the­ory, both stock groups could do well at the same time. But the most in­ter­est­ing trend Walia has ob­served is how the ex­pir­a­tion of the drug pat­ent cliffs and the Af­ford­able Care Act’s pro­vi­sions pro­mot­ing lower drug costs have caused gen­er­ic-drug stocks to soar.

Mo­tif In­vest­ing of­fers oth­er spe­cial­ized port­fo­li­os, such as Gay-Friendly Com­pan­ies, Kings of K Street (com­pan­ies that spend the highest per­cent­age of their money on lob­by­ing), and No-Glass Ceil­ing (wo­men-led cor­por­a­tions).

“Do wo­men make bet­ter CEOs?” Walia asks. “Are gay-friendly com­pan­ies more likely to suc­ceed than non-gay-friendly com­pan­ies?”

You can bet on it.

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