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Must-See Chart: WellPoint Is a Healthy Buy

NEW YORK (TheStreet) -- If a picture paints a thousand words, the WellPoint (WLP) chart speaks volumes about this undervalued health benefits company.

It won't take a thousand words to help us see why the following one-year chart clearly signals that WLP has momentum and upside potential.


WLP ChartWLP data by YCharts

Supported by its rising quarterly revenue per share (the orange line), WellPoint shares have skyrocketed more than 56% in less than 12 months before its latest cool-down to just above $86 per share. What's been the rocket fuel that has lifted the stock of this health insurance company to a market cap of over $25.4 billion?

WellPoint is in the right business at the right time.

It provides network-based managed-care plans to large and small employers, individuals, Medicaid and senior markets in the United States. It also provides various managed care services including claims processing, underwriting, stop loss insurance and other administrative services to self-funded customers.

But the big payday for WellPoint and other health insurance administrators is the Affordable Care Act, and its provisions for expanded state Medicaid coverage through managed care plans. This is an enormous growth opportunity for companies that specialize in managing these low-income population groups.

According to a recent article by Bruce Jaspen, the feds will be dolling out big bucks starting this year:

"As state budgets have been hurt by the stagnant economy, lawmakers have turned more patients eligible for Medicaid over to privately contracted insurance companies. Now, the health law provides a cash infusion of more than $900 billion in federal dollars from 2014 to 2022 to expand Medicaid programs for states interested in the proposition."

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