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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 (NYSE: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 (NYSE: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 (NYSE: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 (NYSE: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 (NYSE: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 (NYSE: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 (NYSE: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?