Citigroup analyst Carl MacDonald said back in March that "commercial managed care names have a lot more upside than downside on the Supreme Court individual mandate decision," and that "in all but one scenario, the stocks are going higher, and there's potential for significant upside if the entire reform legislation is struck." The analyst went on to say that "the perceived negative outcome occurs if the court strikes the mandate but upholds the rest of the bill, but fundamentally, this isn't so bad, since the penalty for not buying insurance is too weak to really matter. " MacDonald said last Thursday that following the Supreme Court's decision, the market will turn "its focus to the November elections, since a Republican victory could have an even more profound impact on the future of health reform than the court." While playing stocks based on news headlines is generally a recipe for pain, if you are going to take this approach, you might as well consider high quality names. TheStreet Ratings takes a very conservative approach to rating all stocks publicly traded on the New York Stock Exchange, AMEX and NASDAQ, that have at least five quarters of financial data available. The ratings emphasize long-term total returns, as well as revenue trends, capital strength and dividends, while also considering short-term performance, financial stability and volatility. A rating of B-minus (Good) or higher is considered a "Buy" recommendation. Here are the four U.S.-based health insurance or benefits management companies with the largest market capitalizations with "Buy" ratings from TheStreet Ratings:
Shares of UnitedHealth Group ( UNH) of Minnetonka, Minn., closed at $58.80 Tuesday, returning 17% year-to-date. The stock is rated A+ (Excellent) by TheStreet Ratings.
Shares of Express Scripts Holding Company ( ESRX) of St. Louis closed at $52.14 Tuesday, returning 17% year-to-date. The stock is rated B+ (Good) by TheStreet Ratings.
In addition to seeing upside for Express Scripts if Walgreen comes to an agreement for a new contract, Henderson said "investors are underestimating ESRX's safety heading into Thursday's Supreme Court ruling -- this ruling will have no fundamental impact on ESRX's business either way." Interested in more on Express Scripts Holding Company? See TheStreet Ratings' report card for this stock.
Shares of WellPoint ( WLP) of Indianapolis closed at $69.10 Tuesday, returning 5% year-to-date. The stock is rated A- (Excellent) by TheStreet Ratings.
While not "making a specific prediction," Gurda said his firm believes "that the risk that individual mandate could be overturned by itself cannot be ruled out, which could pose a potential near-term risk to the shares, and we would hold off on building any new positions. Our 12-month valuation range remains $81-$85." The analyst estimates that WellPoint will earn $7.74 a share this year, followed by 2013 EPS of $8.54. Interested in more on WellPoint? See TheStreet Ratings' report card for this stock.
Shares of Aetna ( AET) of Hartford, Conn., closed at $40.68 Tuesday, for a year-to-date decline of 3%. The stock is rated A- (Excellent) by TheStreet Ratings.
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