Unveiling the Motley Fool’s “All American Drug Cartel” Picks

"307,000,000,000 Reasons to Ignore the ObamaCare Armageddon"

By Travis Johnson, Stock Gumshoe, June 21, 2012

It’s been a few days since we covered a nice, long hyped up teaser from the Motley Fool Stock Advisor — though that’s also probably the newsletter that we’ve covered more than any other, given their popularity and their heavy marketing. So what are they promising this time around?

“The talking heads on TV are telling us that the Supreme Court will decide the fate of the healthcare industry later this week…

“They’re wrong. Because the key decision already happened two months ago. In a different courtroom.

“Very few investors know about this landmark case. Even industry insiders are stunned, calling it “a game changer” and admitting that they “didn’t see this coming [before] 2013.” Our expose takes you inside the chambers, and directs you to the 3 stocks that are perfectly positioned to benefit from this decision — no matter WHAT happens with ObamaCare.

“One of these three companies has boosted its earnings per share by 29% since February. Another just threw itself a $34 billion birthday party (you’ll see why when you check your mailbox next year). And the third one has delivered its shareholders 10 times the return of the S&P 500 in 2012. Our stunning report gives you the lowdown on how — and when — to invest in them. Read about this $307 billion jackpot now!”

Sounds intriguing, no? So what are these three companies? Let’s dig into the ad a bit more …

We get a bit of a “gotcha” tease that plays into the Supreme Court stuff, which everyone is talking about as the Obama healthcare decision pends:

“In the heart of Washington, D.C., just behind the Capitol Building and the National Art Gallery, sits an imposing building with tall Roman columns.

“To say that the men and women who work in this building are extremely powerful would be the understatement of the century.

“Only 83 people have ever held this elite office. Drawing on decades of legal study and courtroom experience, they make decisions that impact the life of every American citizen.

“Even a rumor about what they might say about a controversial topic like healthcare can send Wall Street into a trading frenzy.”

Well, folks think about the Supreme Court as being “behind” the Capitol Building, but I don’t think there technically is a “behind” for the Capitol — both the East side, facing the Supreme Court, and the West side, facing the National Mall, are called “fronts” — the “East Front” and “West Front.” But the main entrance is on the East side, so I guess it’s technically OK to refer to something behind the National Gallery (which is on the Mall) as also being behind the Capitol. Sort of.

Anyway, what they’re teasing here is not the Supreme Court, but another venerable be-columned DC landmark building — the headquarters of the Federal Trade Commission (FTC), a relatively new federal agency (just about to hit its 100 year birthday) that deals principally with consumer protection and competition — so as an investor, you’re most likely to hear about the FTC because of their active review of mergers and acquisitions to curtail monopolistic behavior, or because a company gets in trouble for something like false advertising.

So what’s the decision from the FTC that has Tom and David Gardner seeing dollar signs? Here’s how it’s teased:

“These are direct quotes, in print, from two top hedge fund analysts who were recently interviewed by Bloomberg Finance…

‘Wow, I didn’t see this coming.’

‘People in their wildest speculation thought that, maybe in 2013 [this could happen], but frankly no one put a lot of stock in it.’

“I’m excited to tell you what’s leaving them so tongue-tied. And why it throws gasoline on the fire for these 3 stocks.”

They then go into detail about why some well-known sub-sectors in health care are risky bets right now, like health insurance companies …

“If the Supreme Court strikes down all of ObamaCare, or even just part of it, the insurance companies won’t be celebrating. That’s because the law’s most controversial element — the “individual mandate” — is their diamond engagement ring. In fact, it’s the only reason they ever said “I do” in the first place…

The individual mandate forces 32 million Americans to be their customers. Most of these people are young and healthy; that’s why they were avoiding health insurance in the first place. And young and healthy people happen to be the most profitable customers for the health insurance companies.

What does it all mean for investors? It means there’s a lot of uncertainty built into the price of health insurance stocks. And that uncertainty isn’t going away anytime soon….

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To make a long story short, playing health insurance stocks can be a good investment. But in the current political climate, it might be too risky.”

Or pharmaceutical companies …

“… when you consider that most healthcare spending goes to hospitals, and that the vast majority of hospitals are non-profits, pharmaceuticals are undoubtedly the fastest road to investment profits in the medical industry.

“But that road is a bumpy one. I mean really bumpy.

“Drug research and development is tremendously costly; most of the experiments that those guys in the white lab coats do produce no results at all. And even when they do find something that could be a useful medicine, it rarely makes business sense to develop it.

“Then there’s the testing and approval process. It takes up to 10 years for a new drug to get the green light from the FDA. And one clinical trial can cost up to $100 million.

“That’s why only 1 of every 10,000 compounds that the major drug companies research will ever be approved for sale. Each one of those “successful” drugs costs about 4 billion dollars to develop….”

So if we don’t want to buy these kinds of stocks, many of which are getting bounced around like crazy as folks try to position themselves for whatever they think the Supreme Court will say and what impact that might have on real life, what do we want to