Healthcare stocks poised for rebound after market fall

Healthcare stocks were battered during the recent market selloffs, but are poised for a significant rebound, report Reuters and the Associated Press.

Hospital stocks such as HCA--which have lost more than half their value during the recent selloff in response to negative economic news and the recent downgrade by Standard & Poor's--could see significant gains in the near-term. Healthcare was the strongest-performing sector this year prior to the current correction.

"We are unable to definitively call the bottom but believe the current valuation affords an enormous range of error with respect to forward estimates," wrote Citi analyst Gary Taylor, according to the AP.

Although Taylor noted that Medicare will be likely to impose a 2 percent across-the-board cut to reimbursement later this year because of Congressional gridlock, the discounts to the stock prices are far below what is realistic.

Many other analysts see potential rebounds of 15 percent or more.

"The reaction by and large is probably overdone," Bob Phillips, co-founder of Spectrum Management Group in Indianapolis, told Reuters. "A number of these stocks are still paying great dividends and valuations are incredibly great. Demographically, no matter how you shake it, the population is aging, people will require more healthcare as they age."

Phillips added, "We're comfortable with the overall sector and think it will do well over the next 10 years, whether the government is the direct payer or not."

For more information:
- read the Associated Press article
- read the Reuters article

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