The subject was discussed before, during and after the election ad nauseam, and as huge increases in premiums start to hit consumers, the pressure will be on for President-elect Trump to repeal and replace Obamacare. The question for investors is who will benefit from changes, and who may get hurt? The biggest question of course, is how will they do it?

In a new research report, Jefferies, like many on Wall Street, concede that how things will play out is still a huge jump ball. In fact, the report says straight out:

Entering 2017, the timing and structure of a Trump Administration “repeal and replace” (or delay) legislation remains a significant unknown for healthcare services investors. At this point, we have more questions than answers. That makes high conviction investing a challenge.

With that in mind, the firm stays very safe in its stock picks, looking for companies that can perhaps take advantage of a potential upside in Medicare and avoid any possible downside in Medicaid. Four companies are rated Buy, and for aggressive accounts they could deliver some solid alpha next year.

Centene

This company has a slightly higher bias to Medicaid, but it is one of the four stocks to Buy at Jefferies. Centene Corp. (NYSE: CNC) operates local health plans and offers a range of health insurance solutions. It also contracts with other health care and commercial organizations to provide specialty services, including behavioral health management, care management software, correctional health care services, dental benefits management, in-home health services, life and health management, managed vision, pharmacy benefits management, specialty pharmacy and telehealth services.

Centene provides a portfolio of services to government sponsored health care programs, focusing on underinsured and uninsured individuals. Many receive benefits provided under Medicaid, including the State Children’s Health Insurance Program (CHIP), as well as Aged, Blind or Disabled (ABD), Foster Care and Long Term Care (LTC), in addition to other state-sponsored programs, Medicare (including the Medicare prescription drug benefit commonly known as Part D), as well as programs with the U.S. Department of Defense and U.S. Department of Veterans Affairs.

The Jefferies price target for the stock is $68, and the Wall Street consensus target is $77.75. The stock closed Thursday at $57.24.

Cigna

This is a solid value buy in health care sector. Cigna Corp. (NYSE: CI) is a major health services organization that provides insurance and related products and services in the United States and internationally. All products and services are provided exclusively by or through operating subsidiaries of Cigna, including Cigna Health and Life Insurance Company, Life Insurance Company of North America, Cigna Life Insurance Company of Canada and their affiliates.

The health care giant offers an integrated suite of health services, such as medical, dental, behavioral health, pharmacy, vision, supplemental benefits and other related products, including group life, accident and disability insurance. Cigna maintains sales capability in 30 countries and jurisdictions, and it has approximately 86 million customer relationships throughout the world.

Anthem announced a year and a half ago they would be buying Cigna in a massive $48 billion deal that would create the largest U.S. health insurer by membership. The deal has drawn scrutiny, and reports back in the summer indicated that Anthem may call off its $48 billion bid after facing stiff regulatory challenges. Cigna has said that the deal may indeed not close this year.

Jefferies has a $155 price target, and the consensus target is $150.69. The shares closed most recently at $133.99.

Humana

While this company is poised to be purchased by Aetna, Jefferies feels it has more upside if the deal doesn’t close. Humana Inc. (NYSE: HUM) is a leading health and well-being company focused on making it easy for people to achieve their best health with clinical excellence through coordinated care. The company’s strategy integrates care delivery, the member experience and clinical and consumer insights to encourage engagement, behavior change, proactive clinical outreach and wellness for the millions of people they serve across the country.

Aetna announced some time ago a plan to buy the company for $230 per share. Jefferies notes that while there is still upside to the takeout price, it estimates Humana standalone is only pricing in 30% to 35% of potential Medicare Advantage (MA) upside. The analysts also note they assume MA penetration doubles over the next five years.

Human shareholders receive a 0.55% dividend. The $237 Jefferies price target compares with the consensus target of $219.85. The stock closed yesterday at $204.65 a share.

UnitedHealth

This is a top stock to buy in the rapidly consolidating managed health sector and is still the favorite pick at Jefferies. UnitedHealth Group Inc. (NYSE: UNH) offers the full spectrum of health benefit programs for individuals, employers and Medicare and Medicaid beneficiaries, and contracts directly with more than 850,000 physicians and care professionals and 6,000 hospitals and other care facilities. The company offers a broad spectrum of products and services through two distinct platforms: UnitedHealthcare, which provides health care coverage and benefits services, and Optum, which provides information and technology-enabled health services.

The company has posted outstanding earnings over the past year, and it is one of the companies that limited exposure to the public exchanges. Top analysts also note that the Optum Care opportunity is underappreciated as the business can expand into more markets, and they note the value proposition is resonating with MCOs.

In fact, Jefferies noted in its report:

We acknowledge the stock’s impressive performance this year, but it trades at a modest discount to the market. Operating momentum is strong, the business is well diversified, and Optum’s benefit to the company’s multiple is underappreciated, in our opinion. We believe this makes the company still the safest call in healthcare uncertainty.

UnitedHealth investors receive a 1.82% dividend. The Jefferies price target is $186. The consensus target is $178.82. The stock closed Thursday at $160.62.

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While at the end of the day nobody knows exactly what the final action will be in regards to Obamacare, one thing is for sure: things are going to change at some level. Given the big run in some of these shares investors, may want to add small positions here and see if we pull back some.

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