Skip The Heart Surgery At HCA, But Think Twice Before Selling On Headlines

Some of the cardiologists at HCA (HCA), the nation’s biggest for-profit hospital chain, have apparently done procedures they can’t justify. The company disclosed on Monday that the U.S. Attorney’s Office in Miami has requested information, and the New York Times ran an expose. Investors were shaken by the news.

HCA Chart

HCA data by YCharts

If you’re a patient, this is bad stuff. You don’t want your doctor mucking around with invasive and unnecessary procedures just to drive up costs. But if you’re an investor, HCA’s net income rose 51% last quarter. The stock jumped after the U.S. Supreme Court upheld a key provision in ‘Obamacare,’ and the assumption is HCA will get a boost from health reform.

So it’s no surprise that when sellers dumped the stock, buyers swooped in:

HCA Chart

HCA data by YCharts

This is just another case – see stories here about Wal-Mart (WMT), here about Abbot Laboratories (ABT), and here about Apple (APPL) – of investors overreacting to headlines.

From the editors of YCharts.YCharts Pro Investor Service includes professional stock charts, stock ratings and portfolio strategies.

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