Heath Care Insurers Out of Intensive Care

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Includes: AET, ANTM, CI, HUM, IYH, UNH
by: John D. Frankola

After much debate, negotiation, and deal making, the Senate health care reform bill appears to be on track to be passed this week. Following President Obama’s election in November 2008, the consensus investment opinion was that health care insurers would suffer under any likely health care reform scenario.

In looking at stock price performance since the day after the November 2008 presidential election through yesterday’s closing prices, the health insurers have delivered phenomenal performance, especially compared to the S&P 500 Index.

Here are the numbers:

Percent Change

11/5/08 to


12/21/2009

DJ US Healthcare Index

43.7%

Aetna

42.7%

Cigna

117.5%

Humana

25.1%

United Health

41.5%

WellPoint

55.8%

S&P 500 Index

16.9%

Click to enlarge

Once again, the market has proven the consensus to be wrong. With the 2,700 page Senate bill going forward, it appears that there will be no major damage to the long-term viability of the health insurance industry. With valuations for most companies still below historic averages, quite possibly, these stocks have more room to run.

Disclosure: Author owns a position in AET, CVH and WLP and manages accounts which hold AET, CVH, UNH and WLP.