UnitedHealth Group And Molina Healthcare: Bottom Fishing In Healthcare

Summary

• Health insurers UNH and MOH have been hit hard by rising medical costs, regulatory pressures, and negative earnings surprises, but may offer value opportunities.
• UNH has the benefits of scale and diversification, but DOJ probes and leadership changes are overhangs.
• MOH is less exposed to problem areas like pharmacy inflation and behavioral health, but negative cash flow is a concern; it could be the best value for a rebound trade.
• The MOH price drop seems overdone, and the relative valuations afford UNH a premium, which is arguably no longer warranted.
• Despite long-term recovery potential, I recommend patience—wait for technical momentum to turn before buying; I’m managing risk with covered calls on UNH and watching MOH for entry.

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Analyst’s Disclosure:I/we have a beneficial long position in the shares of UNH either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Note my UNH long position is hedged with short calls. The author is not an investment advisor and offers no advice here. He shares his own analysis solely for the interest of readers.