U.S. employment increased less than expected in December and if that foreshadows an economic slowdown, the long-awaited correction in equity markets will occur. On the other hand, the same government report showed a rebound in wages that may indicate sustained labor market momentum.
Rather than chasing the latest headlines, the best thing to do is to target consistent performers that have established their market dominance. In the insurance business, which tends to be insulated from the wildest market fluctuations, Aetna (AET) is about as well-established as you can get, and its recent performance has been encouraging.
In addition, the insurer, which already has millions of customers, could add a lot more, if it succeeds in merging with longtime competitor Humana. Aetna would pay $37 billion to acquire its rival.
The merger was put on hold after the U.S. Justice Department raised antitrust concerns, claiming it would reduce consumer choice in 364 counties in 21 states. The future of the deal is now in the hands of U.S. District Court Judge John Bates. He is expected to rule on the case in mid-January.
If Bates, an appointee of the pro-business George W. Bush administration, allows the deal to proceed, the stock could jump sharply in the short term. If he rules the other way, the decision could still be overturned by an appeals court.
The incoming administration of Donald Trump could weigh in at some point, and it is likely to side with the massive insurers.
The Humana merger is happening at the same time as Anthem's planned takeover of Cigna, which is also being challenged by the federal government in a separate trial. The two deals would greatly reshape the U.S. health insurance industry by combining four of the five largest insurers.
Whatever happens with the Humana deal, Aetna seems poised for strong returns for the foreseeable future. The company's net income was $604 million for the third quarter of 2016, a substantial increase from the $560 million during the comparable period of 2015. Total revenue also grew from $15 billion to $15.8 billion.
"Our third-quarter performance is a testament to our long-term strategy," said Mark Bertolini, Aetna's CEO. "We will continue to sharpen our focus on participation in key industry growth drivers, while helping lead the move to value-based care and transforming Aetna into a more consumer-centric company."
Aetna is among several top American companies that have fostered growth by serving its existing customers while seizing on key opportunities to expand. Would you like to see a list of companies that have made similarly smart moves - investments that are so solid you can make money on nearly 9 out of 10 trades? Just click here!
Tom Scarlett is an independent contributor who at the time of publication owned none of the stocks mentioned.