Seeking Alpha
, Barchart (25 clicks)
Momentum, long only, newsletter provider
Profile| Send Message|
( followers)  

This morning while screening sectors on Barchart I noticed that the Health Maintenance Organizations (HMOs) group was one of the fastest rising sectors. This is in spite of all the Obama-Care uncertainty we hear out of Washington. The three I found to have interesting numbers were Wellcare Group (NYSE:WCG), Magellan Health Services (NASDAQ:MGLN) and United Health Group (NYSE:UNH). Let's look at the numbers and see what you think.

Wellcare Group provides managed care services for government-sponsored healthcare programs in the United States. The company offers Medicaid and Medicare plans, including health plans for families, children, aged, blind and disabled, as well as prescription drug plans. Its Medicaid efforts include plans for individuals who are dually eligible for Medicare and Medicaid, and beneficiaries of the Temporary Assistance to Needy Families program (TANF), Supplemental Security Income Program (SSI), ABD program, State Children’s Health Insurance program (S-CHIP), and the Family Health Plus program (FHP). The TANF program provides assistance to low-income families with children; the SSI and ABD program offers assistance to low-income aged, blind and disabled individuals; and the S-CHIP and FHP programs provides assistance for families not eligible for Medicaid. Its Medicare plans include stand-alone prescription drug plans and Medicare Advantage plans comprising coordinated care plans (CCP). Medicare Advantage is Medicare’s managed care alternative to original Medicare fee-for-service that provides individuals standard Medicare benefits through Centers for Medicare, Medicaid Services. CCPs are administered through a health maintenance organization and require members to seek healthcare services from a network of healthcare providers. As of December 31, 2009, WellCare Health Plans, Inc. had approximately 1,349,000 Medicaid members and approximately 972,000 Medicare members. The company was founded in 1985 and is headquartered in Tampa, Florida. (Yahoo Finance)

Click to enlarge

Factors to Consider

Barchart Technical Indicators

  • 100% Barchart technical buy signals
  • Trend Spotter buy signal
  • Above its 20, 50 and 100 day moving averages
  • 8 new highs and up 6.38% in the last month
  • Relative Strength Index 65.04% and rising
  • Trades around 53.20 with a 50 day moving average of 48.23

Fundamental Factors

  • Wall Street brokerage analysts have made two strong buy, one buy and nine hold recommendations to clients.
  • Sales projections are for an increase of 8.30% this year and another 5.00% next year.
  • Earnings estimates are positive with an increase of 40.40% this year, followed by .30% more next year and 12.94% annually for the next five years.

General Investor Sentiment

  • On Motley Fool the 490 readers that expressed an opinion are 92% positive and think the stock will beat the market.
  • The more experienced All Stars are even more positive with a 97% vote for the same result.

Magellan Health Services provides managed behavioral healthcare, radiology benefits management, specialty pharmaceutical management and Medicaid administration products and services in the United States. The company provides services to health plans, insurance companies, employers, labor unions and various governmental agencies. Its managed behavioral healthcare services include outpatient programs, such as counseling or therapy; intermediate care programs comprising intensive outpatient programs and partial hospitalization services; and inpatient treatment and crisis intervention services through its provider network of psychiatrists, psychologists, behavioral health professionals, psychiatric hospitals, general medical facilities with psychiatric beds, residential treatment centers, and other treatment facilities. The company’s radiology benefits management services consist of managing the delivery of diagnostic imaging services, which are provided under contracts with managed care companies, health insurers and other health plans, Medicaid, and Medicare members. Its specialty pharmaceutical management services comprise contracting and optimization on behalf of health plans and pharmaceutical manufacturers; dispensing specialty pharmaceutical drugs on behalf of health plans; providing strategic consulting services to health plans and pharmaceutical manufacturers; and providing oncology management services to health plans and state Medicaid programs. The company’s specialty pharmaceutical management services also include the management of specialty drugs used in the treatment of cancer, multiple sclerosis, hemophilia, infertility, rheumatoid arthritis, chronic forms of hepatitis, and other diseases. Its Medicaid administration services include pharmacy benefits administration, medical management information services, fiscal agent services, and healthcare management services. The company was founded in 1969 and is based in Avon, Connecticut. (Yahoo Finance)

Click to enlarge

Factors to Consider

Barchart Technical Indicators

  • 100% Barchart technical buy signal
  • Trend Spotter buy signal
  • Above its 20, 50 and 100 day moving averages
  • 5 new highs and up 4.87% in the last month
  • Relative Strength Index is 64.36% and rising
  • Trades around 54.73 with a 50 day moving average of 51.74

Fundamental Factors

  • Wall Street brokerage analysts have released two strong buy, four buy, but two under perform reports on this issue.
  • Sales consensus is for a decrease in revenue of 4.50% this year and an increase of 8.10% nest year.
  • Earnings projections are for a decrease of 9.70% this year but an increase of 12.90% next year and a 7.63% annual earnings growth over the next five years.

General Investor Sentiment

  • The 77 Motley Fool readers expressing an opinion on this issue vote 87% that the stock will beat the market.
  • The more experienced All Stars are more positive with a 97% vote for the same result.

United Health Group provides healthcare services in the United States. Its Health Benefits segment offers consumer-oriented health benefit plans and services to national employers, public sector employers, mid-sized employers, small businesses, and individuals; and non-employer based insurance options for purchase by individuals. It also provides health and well-being services for individuals aged 50 and older; and for services dealing with chronic disease and other specialized issues for older individuals, as well as health plans for the beneficiaries of acute and long-term care Medicaid plans. This segment offers its services through a network of 730,000 physicians and other healthcare professionals, and 5,300 hospitals. Its OptumHealth segment provides health, financial and ancillary services and products that assist consumers through personalized health management solutions; benefit administration, and clinical and network management; health-based financial services; behavioral solutions; and specialty benefits, such as dental, vision, life, critical illness, short-term disability, and stop-loss product offerings. The company’s Ingenix segment offers database and data management services, software products, publications, consulting and actuarial services, business process outsourcing services, and pharmaceutical data consulting and research services. Its Prescription Solutions segment provides integrated pharmacy benefit management services comprising of retail network pharmacy contracting and management, claims processing, mail order pharmacy services, specialty pharmacy, benefit design consultation, rebate contracting and management, drug utilization review, management programs, disease therapy management, and adherence programs to employer groups, union trusts, managed care organizations, Medicare-contracted plans, Medicaid plans, and third party administrators. The company was founded in 1974 and is based in Minnetonka, Minnesota. (Yahoo Finance)

Click to enlarge

Factors to Consider

Barchart Technical Indicators

  • 96% Barchart technical buy signals
  • Trend Spotter buy signals
  • Above its 20, 50 and 100 day moving averages
  • 5 new highs and up 8.83% in the last month
  • Relative Strength Index is 64.31% and rising
  • Trades around 52.44 with a 50 day moving average of 49.56

Fundamental Factors

  • Wall Street brokerage analysts have published nine strong buy, 12 buy and six hold recommendation on this security.
  • The company forecasts a revenue increase of 7.70% for this year and 6.70% next year.
  • Earnings consensus is for a decrease of 1.00% this year and an increase of 11.80% next year with an annual 11.32% earnings growth rate for the next five years.

General Investor Sentiment

  • This is a very widely followed stock with the readers of Motley Fool with the 3,330 readers following this issue voting 96% that it will beat the market.
  • The more experienced All Stars have an even more positive vote of 98% for the same result.

Summary: I think all three will do well in the years ahead but United Health Group is my personal favorite. It is more widely followed by both the individual and professional investors and gets the highest marks from them. I don't like it because it's the favorite but because it is much larger than the other two companies. The healthcare industry is going to be the focus of a lot of governmental regulation and larger companies have the staff to negotiate those dangerous waters. With the five year earnings growth rate of 11.32%, an increased dividend rate, stock buy backs and an increase P/E ratio, investors could see a total annual return of 16%-18% over the next five years.

Source: 3 HMOs With Bright Futures