Health Care Winners and Losers
[Editor’s Note: The views expressed here are solely those of Ross Kaplan, and do not represent Edina Realty, Berkshire Hathaway (“Berkshire”), or any other entity referenced. Edina Realty is a subsidiary of Berkshire.]
No doubt Las Vegas bookies are already handicapping the 2020 Presidential election.
Not to mention plenty of informal office pools around the country — at least, in offices that aren’t so polarized by today’s politics that the subject isn’t taboo.
But, I’d submit, there’s an even better and arguably more sophisticated proxy for handicapping a certain President’s reelection chances: the stock price of Twin Cities-based health care behemoth UnitedHealth Group.
Stock Price as Political Proxy
Here’s my reasoning:
Health care arguably is one of the Democrats’ two signature issues this election cycle (environmental protection is the other).
If President Bernie Sanders (or Elizabeth Warren, or even Minnesota native daughter Amy Klobuchar) takes the oath of office in January, 2021, it won’t be good for the health care industry’s incumbents.
Who’s one of the biggest winners under the current system?
That would be UnitedHealth Group, with 2018 revenues of $231 billion, and an equally gargantuan market cap of $220 billion.
Tailwinds & Headwinds; “Pure Play”
When Trump stumbles, the economic news is weak, and the Democratic Presidential field looks promising, the prospect of a Democratic administration and Congress seems more plausible.
Investors worry that that spells trouble for the health care status quo, and UnitedHealth’s stock sells off — 
about 25% at the end of 2018.
Conversely, when the economic news is bullish, and Trump’s reelection prospects appear stronger, “Medicare for All,” “Single Payer” health insurance, or similar Democratic proposals recede as an investor worry.
In the stock market, that translates into a tail wind for UnitedHealth Group’s stock, which has been rallying recently.
P.S.: In statistics, something called the “coefficient of correlation” quantifies the relationship between two things.
A coefficient of “-1” indicates completely opposite behavior; “+1” means that they’re perfectly aligned.
My “kischkes” (guts) tell me that “The Donald Trump – UnitedHealth Care correlation” is at least about .80.
