Jefferies & Company's Healthcare Update (GTIV, MHS, EMS, ESRX)

Jefferies & Company is out with a research report this morning, where it takes a look at dynamics in the Healthcare sector and what it means for stocks in its coverage space. The Jefferies analysts said that the level of pessimism rippling through the equity markets remains high, and while we saw improved conditions last week, they fear that investors' positive bias may not last as they struggle to make sense of mixed economic reports. Interesting to note is the Healthcare is not seeing the usual bid that it does in uncertain economic times. The analysts believe that institutional investors won't likely rotate into healthcare services stocks until “they (1) see improved sector volumes and (2) better understand how healthcare reform will ultimately impact providers' business fundamentals. Unfortunately, channel checks are not necessarily indicating any meaningful volume recovery, suggesting that Q3 results could be uninspiring.” The Jefferies analyst also noted that the outcome of the mid-term elections could spark some interest in healthcare service stocks, although it remains questionable whether that interest will be fleeting or not. At the moment, they believe that if Republicans can wrest control of the House and/or the Senate, healthcare stocks could respond favorably as investors price in the potential that elements of the healthcare reform bill could be reversed or "fixed" in some manner. They believe that investors with a long-term focus should look to continue building positions in Express Scripts ESRX, Medco Healtch Solutions MHS, Emergency Medical services Corp. EMS, IPC The Hospitalist Co. Inc. IPCM and Gentiva Health Services Inc. GTIV.