By Lewis Krauskopf
NEW YORK (Reuters) - Shares of U.S. hospital operators have regained some favor to start 2017, as investors set aside concerns about an immediate dismantling of Obamacare.
Hospital stocks sold off after the Nov. 8 presidential election of Donald Trump, who vowed to repeal the Affordable Care Act (ACA), known as Obamacare. The law expanded coverage, aiding hospitals by reducing the number of uninsured patients who could not pay bills.
But Trump and Republicans in Congress have struggled with swift action, with some lawmakers saying recently the task had become more of a repair job. Trump himself said recently that a replacement may not come until 2018.
Shares of HCA Holdings <HCA.N>, Tenet Healthcare <THC.N>, Community Health Systems <CYH.N> and LifePoint Health <LPNT.O> have climbed at least 10 percent this year, with Tenet rising some 30 percent. The S&P 500 healthcare sector <.SPXHC> has risen 6 percent.
"Everybody was incredibly bearish," said Leerink Partners analyst Ana Gupte, adding that the "Republican efforts have been going in fits and starts."
The potential for a "rip-it-out without an immediate replacement" of the ACA appeared less likely, said David Heupel, a healthcare analyst with Thrivent Investment Management.
"People are starting to get a little bit more comfortable that the doomsday scenario for the hospital group is probably off the table, that there will be some semblance of coverage," Heupel said.
HCA, whose $31 billion market value far exceeds rivals, also reported encouraging fourth-quarter results last month, helping push its shares to 17-month highs.
HCA is the favored hospital stock among analysts, with 17 of 23 analysts recommending it, according to Thomson Reuters data.
LifePoint, with a $2.5 billion market cap, reports results on Friday, with Tenet and Community Health, whose debt loads have pressured their shares, due later this month.
Hospitals are valued at 7.2 times next twelve months' EBITDA estimates, slightly below the five-year average of 7.4 times, Barclays analysts said in a report last week.
Despite recent stock gains, skepticism remains. Short interest in the healthcare facilities sector increased by $77 million to $4.2 billion over the past month, including increases in HCA, Tenet and Community Health, according to financial analytics firm S3 Partners.
Generalist investors are likely still wary of hospital stocks amid other investment opportunities, said Les Funtleyder, healthcare portfolio manager at E Squared Asset Management.
"The longer we go that nothing bad happens, the more comfortable people will feel that the worst case is off the table and gradually revalue the hospitals up," Funtleyder said.
(Reporting by Lewis Krauskopf; Editing by Nick Zieminski)