3) Insurance: The Good and the Bad
Buy rated UnitedHealth (NYSE:UNH) is a heavy hitter in the healthcare sector, being the largest single health carrier in the United States. In serves more than 75 million people worldwide. The company served nearly 34.4 million patients at the end of the third quarter, up about 1.7 million from a year earlier and it spent a less-than-expected 80.7% of its premium revenue on medical claims (the ratio is an important gauge of profitability).
This company also stands apart from its peers on several fronts. First, out of 23 companies in the industry, its earnings growth is ranked at fourth, its return on equity weighs in at number six and its 1.4% dividend yield is the third-highest in the industry. With a leading industry position, it is difficult to see how the solid stock performance won’t continue.
On the other side is WellPoint (NYSE:WLP), which is a mixed bag when it comes to fundamental strength. With nearly 34 million members this company is one of the largest providers of health benefits. Just a few days ago the company branched out by buying out 1-800 CONTACTS Inc., the largest direct-to-consumer contacts retailer in the nation. But even a big buyout like this isn’t enough because WellPoint still has a lot of financial issues to resolve before it becomes a buy in my book.
In the most recent quarter, the company posted an 8% profit loss and a sales miss. While WellPoint has slightly upped its 2012 bottom line guidance, analysts aren’t particularly bullish about the company’s second-quarter prospects. Currently the analyst community expects the company to grow sales by less than 3% and earnings by 14%. This is beneath the industry average of 20% expected earnings growth.
In fact, today the stock gapped down Thursday after the Supreme Court’s ruling while UNH has held its ground—this just comes to show which of the two companies is a much safer bet in this market.
It’s a Marathon, Not a Sprint
I hope that this post has given you unique insight into what today’s Supreme Court decision means to you as a taxpayer, voter and investor.
And I want you to think of investing like a marathon, not a sprint. ObamaCare will certainly be top priority for everyone for the coming months. Romney, if he’s smart, will hammer this topic in his ad campaigns and fundraising activities right up to the election. And President Obama will need to continue to address the issue—as he admitted in his own address to the press and the country this afternoon.
This will keep the topic top of mind for investors, fuel uncertainty in the market and, as I mentioned earlier, stoke talk and fears of another recession alive. But, and I can’t stress this enough, there are opportunities to profit in this market no matter what happens with taxes, healthcare or the election. If you keep your focus on the long-term and not panic with each news item, you’ll find more success than failure in this market.
And I’ll continue to cover these news items and anything impacting you as an investor here in our free Daily Blog.