Healthcare Stocks to Lowball No. 2: UnitedHealth Group Inc. (NYSE: UNH)
Fitz-Gerald’s second healthcare stock to buy, UnitedHealth Group Inc. (NYSE: UNH), could have the most riding on the Supreme Court decision of any health insurer.
“The $10.7 billion company is so dependent on the survival of Obamacare that it even sent in a team of experts to help with website design when the national health exchanges debuted to a disastrous website launch in late 2013,” Fitz-Gerald said. “Its leadership was terrified that the law which featured so rosily into their business models might not survive.”
Last year, UNH’s revenue hit $130.5 billion. That was a 7% increase from 2013. Growth continued into 2015. In Q1 revenue was up 11.5% from the previous year to $32.6 billion.
UNH stock has soared as well. In the last 12 months, it’s up 56.3%. In the last five years it is up 297%.
“The improvement can be traced back to the 1.6 million enrollments that UNH announced it snagged year-over-year in its Q1/2015 earnings report,” Fitz-Gerald explained. “That’s a major expansion of its customer base, for which it can thank the authors of Obamacare, and the individual mandate in particular.”
The Supreme Court ruling could spur a correction in this healthcare stock, but Fitz-Gerald says it’s a strong enough company to survive any AHA changes. He recommends a lowball order at $85.20 or lower with a 25% trailing stop.
Healthcare Stocks to Lowball No. 3: Anthem Inc. (NYSE: ANTM)
Fitz-Gerald’s third pick is America’s second-largest health insurer Anthem Inc. (NYSE: ANTM). In 2014, ANTM had 1.8 million new enrollees. More than 800,000 of those were a result of Obamacare’s expanded Medicaid program.
Recently, CEO Joe Swedish announced that he will be doubling the company’s advertising budget in states with expanded Medicaid.
“If Obamacare unravels, Anthem’s expanded Medicaid program will collapse alongside it – and that would mean a harsh correction for the company’s stock,” Fitz-Gerald said. “But like UNH, it has the resources to withstand the shock, having reported $21.5 billion cash-on-hand in its last quarterly report, according to Yahoo! Finance.”
ANTM has gained 55% in the last year and 211% in the last five. It now trades over $165 per share.
Fitz-Gerald recommends a lowball order at $116.25 or lower with a 25% trailing stop.
“Profitable investments are not about politics or philosophy,” Fitz-Gerald. “But they are absolutely about the historic wealth transfer that is inevitably created with the two collide.”
The Bottom Line: We’re on the precipice of a Supreme Court ruling that could be the Obamacare “nightmare” scenario that could send premiums skyrocketing. And if that happens, investors can expect a major pullback from healthcare stocks. But this isn’t a time to panic; it’s a time to scoop up strong healthcare stocks at a discount. Fitz-Gerald’s three picks are IHF, UNH, and ANTM.
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