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One can look at unusual options activity, as I described here, to find potential investments. Another factor to look after is strong insider activity as I described here. Also, one time-tested strategy is to find stocks trading with favorable valuations such as these here, and the following HMO stocks:

1) United Health Group (UNH) is the largest HMO in the world near $100B in annual revenue. The stock looks favorably priced at a 9.5x P/E, .5x EV/S, 8.4x EV/FCF, 1.6% dividend yield, and as of last quarter 86.5% of shares held by institutions. Moreover, the payout ratio is extremely low at 12%, so expect continued dividend hikes. This is a great long-term buy at $40.50.

2) WellPoint (WLP) is a giant itself with annual revenue at approximately $60B. The stock looks even cheaper at 8x P/E, .2x EV/S, .9x P/B, 1.6% dividend yield, and as of last quarter 86.7% of shares held by institutions. The company trades at a pricey 13x EV/FCF, but has approximately $10B in net cash and a very small 7% payout indicating more dividend raises in the near future. This is a safe buy here at $61.

3) Aetna (AET) comes in with annual revenue at approximately $35B. The stock trades at a 7.5x P/E, .4x EV/S, 12.8x EV/FCF, 1.8% dividend yield and as of last quarter 90.0% of shares held by institutions. I don't see any reason not to own this stock when we see it's payout ratio at a paltry 4% as well. This is a buy at $34.

4) Cigna (CI) has favorable valuations as well trading at just over a 6.5x P/E, .55x EV/S, 8.3x EV/FCF, and and as of last quarter 86.6% of shares held by institutions. However, the stock essentially has no dividend and when I see these stocks above displaying similar valuations, I'd rather own one of those.

5) WellCare Health Plans (WCG) is considerably smaller than the previous four with annual revenue at approximately $6B. However, it shows great value with a 9x P/E, .01x EV/S, .3x EV/FCF, and as of last quarter 86.6% of shares held by institutions. Even though this pays no dividend, it's virtually debt-free and trading at such a discount to FCF. This is a buy here for me at $33.75

6) Centene (CNC) comes in with annual revenue at approximately $5B. The company trades at 13x P/E, .2x EV/S, 22x EV/FCF, no dividend, and as of last quarter 98.6% of shares held by institutions. With these companies above either giving a decent dividend and/or trading at cheaper valuations, I'd rather buy those than depend on expected growth which CNC is looking towards to support the richer valuation.

7) Molina Healthcare (MOH) is the smallest of the group with revenues at approximately $4.5 B. The stock is decently priced at 9.3X P/E, .01x EV/S, .1x EV/FCF, massive net cash position of approximately $650M, and as of last quarter 61.0% of shares held by institutions. Even though this stock pays no dividend and has the least institutional ownership of the group, it is trading at such a discount to FCF and has such a fantastic, cash-rich, balance sheet that I'd be a buyer here at $14.10.

Source: HMO Stocks With Large Institutional Ownership: Worth Buying At Depressed Levels?