Health insurer stocks seen cheap, but no bargain
U.S. health insurer stocks appear cheap after a rash of profit warnings unleashed broad bearish sentiment. But even investors who like to capitalize on beaten-down shares fail to see a bargain — at least not yet.
Industry giant WellPoint Inc (WLP.N: Quote, Profile, Research) stunned the market earlier this month by cutting its 2008 profit forecast, creating fear the health insurance industry is entering a cyclical downturn. Several rivals followed by reexamining their outlooks or lowering their forecasts.
Investors want to wait at least until the companies report first-quarter results starting next month for assurance that medical cost and premium pricing trends are stable before diving in.
Some are further spooked by the U.S. political climate, worried that as the presidential race heats up it will bring attacks on health insurance companies throughout the year that could increase pressure on the stocks.
All three major U.S. presidential candidates are under pressure to bring down booming health-care costs — and one target could be reimbursement rates for the companies involving the Medicare government health plan for the elderly.
“We try to buy things that have blown up and we have a more contrarian bent,” said Derek Taner, a portfolio manager with the AIM Global Health Care Fund in San Francisco quick payday $500 payday loan. “But so many other areas are roughed up … areas with less government risk and good earnings visibility.”
“We’re not buying, we haven’t been buying and we’re kind of staying away from that group until we figure out what’s happening here,” Taner said.
No one doubts that the stocks suddenly look a lot cheaper after a broad sell-off precipitated by the WellPoint announcement and further profit warnings by Humana Inc (HUM.N: Quote, Profile, Research) and Coventry Health Care Inc (CVH.N: Quote, Profile, Research).