Health insurance stocks have the potential to spike this winter and spring for several reasons. For one, President-elect Biden is not in favor of universal healthcare, setting the stage for private industry to continue to make large sums of money. Secondly, our population is rapidly aging, primarily due to the enormous Baby Boomer age cohort entering its golden years.

Add in the fact that additional healthcare will be required in response to the pandemic, and investors have all the more reason to load up on health insurance stocks. However, the sheer number of stocks in this industry makes it challenging to pinpoint those most likely to emerge from the pack.

Without further ado, let’s take a look at four intriguing health insurance stocks: UnitedHealth Group (UNH), Anthem (ANTM), Cigna Corporation (CI), and Molina Healthcare (MOH).

UnitedHealth Group (UNH)

As the world’s largest healthcare services provider, UNH has more than 50 million customers in the United States alone. UNH also serves five million more customers in other countries. Examples of UNH healthcare service and products include PPOs, HMOs, managed fee for service programs, and point of service plans.

If you are hesitant to invest in healthcare stocks, perhaps the fact that UNH has the most expansive and diverse membership base of any company in its space will convince you to consider adding it to your portfolio.

UNH’s POWR Ratings are solid: “A” grades in the Buy & Hold Grade and Trade Grade components, along with “B” grades in Industry Rank and Peer Grade. UNH is ranked first out of nine stocks in the Medical – Health Insurance industry.

Analysts are heaping praise on UNH, establishing an average price target of $386.58 for the stock, indicating a potential upside of 11%. Of the twenty-one analysts who cover UNH, seventeen recommend buying, four recommend holding, and none recommend selling. Furthermore, UNH has a reasonable forward P/E ratio of 20.62.

Though there is certainly the potential for UNH to dip to what appears to be its price floor at $290, the stock could also continue moving upward, assuming the economy gains momentum as we transition to a return to normal. Add in the fact that UNH’s Optum segment has better operating earnings than the company’s health insurance segment, and the case can be made for UNH to develop into somewhat of a growth company. 

Anthem (ANTM)

ANTM provides you with the opportunity to invest in one of the world’s largest publicly owned managed care organizations. ANTM is well-known as an independent licensee of BCBSA, short for Blue Cross Blue Shield Association. ANTM care plans are offered to employers of different sizes and individuals, senior markets, and Medicaid recipients.

The POWR Ratings reveal ANTM has an “A” grade in the Trade Grade component, along with “B” grades in Buy & Hold, Peer Grade, and Industry Rank. ANTM is ranked third out of nine stocks in the Medical – Health Insurance industry.

To say the analysts are bullish on ANTM would be a dramatic understatement. The industry experts have established an average price target of $367.56 for the stock, meaning it has the potential to increase by 17%. Of the ten analysts who cover ANTM, nine recommend buying, one advises holding, and none believe selling is the best course of action.

ANTM has a forward P/E ratio of 13.94, indicating it is likely underpriced at $315.40 per share. 

Cigna Corporation (CI)

CI owes some of its success to the acquisition of Express Scripts Holding Company, a popular prescription processing business. CI also offers dental, medical, life, accident, and disability insurance.

Check out CI’s POWR Ratings, and you will be impressed. CI has “B” grades in the Industry Rank, Trade Grade, and Buy & Hold Grade components. CI is ranked 4th of nine stocks in the Medical – Health Insurance industry.

Analysts like CI, setting an average price target of $253.36 for the stock, indicating it has the potential to jump nearly 25%. Add in the fact that CI has a forward P/E ratio of a mere 10.88, and its future looks all the more optimistic. It probably won’t take long for value-oriented bargain hunters to take note of CI’s unreasonably low P/E ratio.

Molina Healthcare (MOH)

MOH delivers healthcare services to individuals eligible for coverage through programs provided by the government. Though MOH’s customers are low-income, the company’s stock is on a tear. This multi-state managed care organization was priced just under $140 a year ago, dipped to $107 during the spring selloff, moved up to $185, dipped right back down to $153 in late September, and has taken off since. At the moment, MOH is only $16 away from its 52-week high of $224.

MOH has exemplary POWR Ratings highlighted by an “A” Trade Grade and a grade of “B” for Industry Rank and Buy & Hold Grade. If the analysts are correct with their average price target of $243.40, MOH has the potential to increase by 17.39%.

Though plenty of people have lost health insurance due to the economic slump, MOH’s government-covered customers will continue to receive coverage moving forward, helping MOH continue to generate revenue.

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UNH shares were trading at $346.85 per share on Wednesday morning, down $0.50 (-0.14%). Year-to-date, UNH has gained 19.93%, versus a 17.95% rise in the benchmark S&P 500 index during the same period.

About the Author: Patrick Ryan

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...

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