3 Defensive Stocks to Outperform in this Bear Market

NYSE: ELV | Elevance Health News, Ratings, and Charts

ELV – While the stock market has entered a bear phase following the release of multi-decade high inflation data, the health insurance industry could survive the downturn because of the near-inelastic demand for health coverage. Therefore, investors looking to dodge a market downturn could bet on fundamentally sound health insurance stocks Anthem (ANTM), UnitedHealth (UNH), and Humana (HUM).

The overall market sentiment has been increasingly bearish since the beginning of the year due to the war between Ukraine and Russia, supply chain disruption, and rising energy prices. In addition, the economy has been under severe inflationary stress, with the Consumer Price Index rising to 8.6% in May, the fastest advance in more than 40 years.

The S&P 500 has officially entered a bear market on concerns over the Fed’s aggressive interest rate hikes to fight the multi-decade-high inflation. Moreover, the consumer sentiment fell sharply to a record-low reading of 50.2, down from a May reading of 58.4, flaming concerns about a potential recession in the U.S. economy.

Given this backdrop, we think it could be wise to bet on shares from the defensive health insurance industry. A near-inelastic demand for health coverage should help fundamentally sound stocks Anthem, Inc. (ANTM), UnitedHealth Group Incorporated (UNH), and Humana Inc. (HUM) to survive the market correction.

Anthem, Inc. (ANTM)

ANTM operates as a health benefits company that operates through four segments: Commercial & Specialty Business; Government Business; IngenioRx; and Other. The company offers a spectrum of network-based managed care health benefit plans to large and small groups, individuals, Medicaid, and Medicare markets.

On May 5, 2022, ANTM acquired Integra Managed Care, a Managed Long-Term Care Plan in New York that helps adults with long-term care needs and disabilities live safely and independently in their own homes. Felicia Norwood, Executive Vice President of ANTM’s Government Business Division, said, “We’re pleased to complete this acquisition and work alongside our new colleagues as we continue to grow our Medicaid business and enhance the healthcare experience for all of our members.”

ANTM’s revenue increased 18% year-over-year to $37.89 billion for the fiscal first quarter ended March 31, 2022. Additionally, the company’s adjusted net income grew 16% year-over-year to $2.02 billion, while its adjusted EPS came in at $8.25, up 17.7% year-over-year.

ANTM’s EPS is expected to be $32.46 in fiscal 2023, representing a 13.4% year-over-year increase. It also surpassed the consensus EPS estimates in each of the trailing four quarters. The company’s revenue is expected to increase 14.6% year-over-year to $38.15 billion for the quarter ending June 30, 2022. Over the past nine months, the stock has gained 25.6% to close yesterday’s trading session at $462.89. It has a beta of 0.97.

ANTM’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The stock has a B grade for Growth, Value, Stability, and Quality.

Within the A-rated Medical – Health Insurance industry, ANTM is ranked #1 out of 11 stocks. Click here for the additional POWR Ratings for ANTM (Momentum and Sentiment).

UnitedHealth Group Incorporated (UNH)

UNH operates as a diversified health care company in the United States operating through four segments: UnitedHealthcare; OptumHealth; OptumInsight; and OptumRx. UNH offers Medicaid plans, health management services, advisory consulting arrangements, and pharmacy care services and programs, among others.

On April 14, 2022, Andrew Witty, CEO of UNH, said, “Disciplined execution of our long-term strategy, with a sharp focus on ensuring access to care for the people we serve, enabled us to deliver high-quality, diversified growth across Optum and UnitedHealthcare during this first quarter of 2022.”

UNH’s revenue increased 11% year-over-year to $80.10 billion for the first quarter ended March 31, 2022. The company’s earnings from operations grew 4.5% year-over-year to $7 billion, while its adjusted net earnings increased 3% year-over-year to $5.24 billion. Also, its adjusted EPS came in at $5.49, up 3.4% year-over-year.

Analysts expect UNH’s EPS to come in at $5.53 for the quarter ending September 30, 2022, representing a 22.3% year-over-year increase. The company surpassed analyst EPS estimates in each of the trailing four quarters. The company’s revenue is expected to increase 14.7% year-over-year to $79.71 billion for the quarter ending June 30, 2022. Over the past year, the stock gained 18.1% to close yesterday’s trading session at $ $469.70. It has a beta of 0.83.

UNH’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.

In addition, it has a B grade for Growth, Stability, and Quality. Click here to access UNH’s ratings for Value, Sentiment, and Momentum. UNH is ranked #4 in the same industry.

Humana Inc. (HUM)

HUM operates as a health and well-being company, operating through Retail; Group and Specialty; and Healthcare Services segments. The company offers medical and supplemental benefit plans to individuals. It has a contract with the Centers for Medicare and Medicaid Services to administer the Limited Income Newly Eligible Transition prescription drug plan program.

On June 9, 2022, HUM announced that it would bring its onehome value-based home care model to Virginia for the first time. Andrew Agwunobi, M.D., MBA, President of HUM’s Home Solutions business, said, “Humana’s acquisition of onehome in 2021 and expansion into Virginia this year further advances the company’s commitment to building our Home Solutions business and value-based offerings.”

HUM’s adjusted revenue increased 16% year-over-year to $24.08 billion for the fiscal first quarter ended March 31, 2022. The company’s adjusted pre-tax income grew 7.1% year-over-year to $1.34 billion, while its adjusted EPS came in at $8.04, representing a 4.8% year-over-year increase.

Analysts expect HUM’s EPS to increase 29.6% year-over-year to $6.26 for the quarter ending September 30, 2022. It surpassed Street EPS estimates in each of the trailing four quarters. The company’s revenue is expected to increase 14.3% year-over-year to $23.47 billion for the quarter ending June 30, 2022. The stock has gained 4.2% over the past nine months to close yesterday’s trading session at $426.28. It has a beta of 0.86.

It’s no surprise that HUM has an overall A rating, equating to Strong Buy in our POWR Ratings system. The stock has a B grade for Sentiment, Growth, Value, and Quality.

Click here to see HUM’s ratings for Momentum and Stability as well. HUM is ranked #5 in the same industry.


ANTM shares were trading at $459.79 per share on Tuesday afternoon, down $3.10 (-0.67%). Year-to-date, ANTM has declined -0.27%, versus a -21.09% rise in the benchmark S&P 500 index during the same period.


About the Author: Nimesh Jaiswal


Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...


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