Managed Care Winners and Losers: WellPoint

Updated from 3:52 p.m. ET

Managed care stocks rallied Wednesday as investors reversed what some analysts saw as overselling in the wake of worries over Medicare.

Several health insurers saw their stocks approach 52-week lows over the past week, after preliminary Medicare Advantage reimbursement rates for next year were announced and President Obama unveiled a proposed budget that includes smaller payments for the program.

Some analysts have said managed care stocks will remain volatile until more details of Obama's plans emerge.

The Standard & Poor's 500 index rose more than 2% Wednesday afternoon, but several insurers outpaced that.

"I think it's just a reflex rally from oversold levels, really," said Miller Tabak & Co. analyst Les Funtleyder. "In my view, a lot of the selling on a fundamental basis was overdone, given what we know."

Funtleyder said he thinks the sector is undervalued, but some investors may wait for more concrete details on Medicare Advantage rates or the president's budget before returning to the stocks.

Diamond Capital Management Vice President Steven W. Voss said some of the stocks offer compelling values at their current prices. His Indianapolis investment firm owns shares of WellPoint (WLP Quote), Aetna (AET Quote) and UnitedHealth Group (UNH Quote).

"A lot of bad news is already in the price of these stocks," he said.

Cigna (CI Quote) saw shares rise 7.6%, or $1.01, to $14.34 Wednesday afternoon. The insurer on Wednesday reaffirmed its 2009 income guidance.

The company expects adjusted operating income of $1.08 billion to $1.15 billion this year, or $3.95 to $4.25 per share.

Analysts polled by Thomson Reuters expect $3.90 per share.

WellPoint shares rose 7.2%, or $2.19, to $32.83; Aetna rose 7.5%, or $1.48, to $21.26; and Humana (HUM Quote) shares climbed more than 4.8%, or 96 cents, to $20.99.