Trump re-election creating investment opportunity in healthcare sector - Business Insider

Lukasz Tomicki, founder and portfolio manager of LRT Capital Management, thinks it would be a “big surprise” if Donald Trump is not re-elected in 2020.Since Tomicki thinks Trump is likely to win the election — based on the historical track record — he's betting that major reform will not take place in the healthcare space.He also sees that maintained status quo translating into growth.Tomicki says political rhetoric and volatility is helping to create a buying opportunity within the healthcare space that is likely to continue for the next 12 months.Click here for more BI Prime stories.Whether you like it or not, politics will be at the forefront of investor attention in 2020.After all, the candidates fighting to call 1600 Pennsylvania Avenue home possess wildly different ideologies. And if there's one thing Wall Street doesn't like, it's ambiguity and uncertainty. To further complicate matters, the upcoming race is likely to be close one, which means the market could be especially vulnerable to heightened market volatility as polls emerge.Lukasz Tomicki, founder and portfolio manager of LRT Capital Management, has studied history and found that it leans in President Trump's favor going into 2020 — as long as there's no recession.“The historical record is that incumbent presidents tend to get re-elected,” he said on “The Contrarian Investor Podcast.” “More to the point, if there is no recession in the election year, incumbent presidents — generally speaking — are re-elected with 100% probability.”Talks of an impending recession were seemingly ubiquitous just a few months ago, but have largely abated as economic data and trade talks improved. If Trump can avoid an economic downturn in 2020, Tomicki thinks that investors should prepare for another four years of this administration.“If you look at the last 150 years of presidents, we've had 19 presidents,” he said. “Two of them die in office, 17 run for re-election. And of those 17, 12 have no recession in the election year — and 12-out-of-12 get re-elected.”He continued: “On the flip side, every single one that runs for re-election during a recession loses. If Trump is not re-elected, that would be a big surprise relative to history.”A Trump victory bodes well for healthcareBefore founding his hedge fund, Tomicki expressed his analytical side by teaching himself how to code and develop software. Ironically enough, his software was used to track political legislation. Today, Tomicki focuses his efforts on sniffing out investments that are value-oriented.Much like Warren Buffett, he focuses on the long-term, looks for businesses with sustainable competitive advantages or “moats,” and concentrates his capital in just a handful of securities. But that doesn't mean he's not keeping a close eye on the regulatory landscape.“I think there's probably no major financial regulation or healthcare regulation that comes down the line,” he said. “Policy stability is most likely to prevail.” That last bit is important for Tomicki's portfolio — and he thinks it's unlikely that congress supports legislation that dramatically shifts the landscape going forward.Healthcare reform has been a topic of hot debate amongst potential presidential candidates and has suppressed the amount of enthusiasm investors have expressed around the sector in 2019. In fact, the Health Care Select Sector SPDR Fund (XLV) — a proxy for the overall performance of the healthcare sector — has widely underperformed the overall market on a year-to-date basis.However, Tomicki thinks that election volatility and rhetoric are creating a buying opportunity in the space.“I think investors should be looking at healthcare for the next 12 months,” he said. “For longer term investors, I think this will spell an opportunity.”As far as individual names are concerned, Tomicki picked up shares of UnitedHealth Group (UNH) a few months ago.“It just so happened that Elizabeth Warren started fading in the polls,” he said. “They reported good earnings, they upped their buyback, and the stock is up 25% in 8-weeks or so.”“We certainly like UnitedHealthcare for the longer-term — and that's just the beginning of what I think be several healthcare investments we'd like to make over the next 12-months,” he concluded.