A select group of medical stocks are on a Bill Shorten rally after the opposite leader announced his alternative budget last night.
The rally I am talking about isn’t political in nature but the share market kind. The Integral Diagnostics Ltd (ASX: IDX) share price surged 6.8% to $2.66 ahead of the market close, while the Capitol Health Ltd (ASX: CAJ) share price and Paragon Care Ltd. (ASX: PGC) share price have jumped over 4% each.
The outperformance of this group stands in contrast to the 0.6% drop in the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index.
The $2.3 billion boost for the sector
Prime Minister-in-waiting Shorten is promising to spend $2.3 billion on cancer detection and treatment if the Labor party wins the upcoming federal elections, according to the Australian Financial Review.
Shorten is calling the cash injection the most important Medicare investment since the universal healthcare initiative was launched in 1984.
The move will be welcomed by all Australians, I suspect, given that nearly everyone has been affected by cancer or knows of someone who have suffered because of cancer.
The cash pledge will mean that six million Australians won’t have to pay anything (or very little) for cancer scans, including MRIs, over the next four years; while three million specialist doctor appointments will also be covered.
Shorten is also promising that every cancer drug recommended by experts will be subsidised by the PBS – meaning that patients on these drugs won’t be sent to the poor house.
The small cap stocks that benefit the most
Integral Diagnostics and Capital Health run diagnostic imaging facilities across the country. Paragon Care sells medical equipment, including diagnostic machines.
Integral Diagnostics CEO Dr Ian Kadish told the AFR that Medicare has been slow to recognise MRI as an essential service with the number of MRIs done in Australia running at half the rate of those in Europe and New Zealand.
If Shorten’s pledge to cancer treatment is as popular as I think it will be, the federal government could find itself under pressure to offer something similar.
That will be good news for these companies and the estimated 145,000 Australians who are diagnosed with the disease each year.
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Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Paragon Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.