Hospital Stocks Rise In Tandem With COVID-19 Cases

A Shift in Perspective

During November, hospital stocks surged as COVID-19 cases reached their highest levels since the beginning of the pandemic. Shares of two national operators, Tenet Healthcare Corp (THC) and HCA Healthcare (HCA), rose by over 21% last month. That’s 10% more than the S&P 500’s gains during the same time period.

The spike in the price of hospital stocks is partially because hospital operators are still trading lower than they were at other points during the year. Therefore traders are buying shares of hospitals in anticipation that they will continue to climb. Investors also seem to be gaining confidence in hospitals’ ability to stay afloat even when they are under severe strain as a result of spikes in COVID-19 cases.

Split Congress Drives Stock Stability

Investors now feel more certain about what lies ahead for hospitals after a period of extreme uncertainty related to COVID-19 and the presidential election. For example, Wall Street appears to think that a major overhaul of the Affordable Care Act is unlikely given what is projected to be a split Congress.

Between cost-cutting measures and federal assistance, hospitals have also done their part to reassure investors that they can keep operations running during the pandemic. Non-coronavirus patients have also returned to hospitals for more profitable routine procedures. This has helped hospitals shore up their balance sheets and injected more confidence into the sector.

Uncertainty Ahead

The positive sentiment in the broader market is encouraging for healthcare investors who hope to see share prices increase in the coming months. However, the future is still foggy for hospital operators. Public health officials are preparing for a spike in COVID-19 cases due to congregations during the Thanksgiving holiday. On Sunday, there were 135,000 new infections in the US. As a result, hospitals saw a record of 93,000 new coronavirus patients. Some have now halted elective surgeries in anticipation of a surge in patients.

Despite these difficulties, analysts say that unless another nationwide lockdown is on the way, they expect hospitals will stay profitable and will outperform the rest of the market heading into next year.

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