We recently The 10 Best Health Insurance Stocks to BuyIn this article, we’ll take a look at how Elevance Health, Inc. (NYSE:ELV) stands relative to other health insurance stocks.
Healthcare market: what does the future hold?
2023 posed significant challenges for the healthcare sector as investors adjusted their portfolios to adapt to the high interest rate environment. This caused the sector to underperform compared to other segments of the stock market, especially technology and communication services. The turbulent environment has understandably created anxiety and pessimism about the future. According to Deloitte’s annual Healthcare Outlook survey, only 3% of health system executives and 7% of health plan executives said their outlook for 2024 was “positive,” down from 15% and 40%, respectively, marking a significant decrease from the previous year.
On the bright side, the aging baby boomer generation, which accounts for 20% of the U.S. population, is driving the growing demand for healthcare services and products, such as insurance, medicines, medical equipment, and hospital care. Forecasts indicate that healthcare costs will increase significantly over the next decade. In the U.S., the Centers for Medicare and Medicaid Services projects that national healthcare spending will increase 5.6% annually between 2023 and 2032. Similarly, in OECD countries, healthcare spending as a percentage of GDP is expected to increase from 8.8% to 10.2% by 2030. In addition to the aging population, a growing middle class in emerging markets will also contribute to the growing demand for healthcare services.
One of the biggest stories this year has been the rise of GLP-1 drugs as weight loss treatments, which has helped major developers Eli Lilly and Company and Novo Nordisk (NVO) significantly outperform their peers. Meanwhile, after vaccine and therapeutics sales approached $100 billion in 2022, many companies experienced a deep downturn due to declining post-COVID revenues, making year-over-year comparisons difficult. On the other hand, BlackRock predicts that the Healthcare sector will have the highest 12-month forward profit growth of all sectors year-over-year, with sales growth coming in behind only Consumer Goods and Information Technology.
Current state of health insurance
Health insurance remains a major issue, especially in the United States. In 2022, more than 300 million Americans, about 92% of the population, had health insurance. The U.S. healthcare system is a mix of public and private insurers, with private insurance being the predominant form of insurance. In the same year, more than half of the insured had private insurance through their employers, and about 36% were enrolled in public insurance programs such as Medicare or Medicaid.
As of 2023, the U.S. health insurance exchanges, established under the Affordable Care Act in 2014, are celebrating their 10th year of operation. Over the past decade, the individual market has experienced annual fluctuations in insurer participation, pricing, and plan options, making it interesting to say the least. According to McKinsey, consumer engagement is expected to increase significantly by 25% from 2020 to 2022, reaching approximately 16 million participants, coinciding with enhanced subsidies introduced in the American Rescue Plan Act of 2021.
The global health insurance industry is expected to experience significant growth in the coming years. According to one report, the global health insurance market is projected to achieve a compound annual growth rate (CAGR) of 9.9% from 2022 to 2030, reaching a market value of $5.28 trillion by 2030.
Insurance company, car and family healthy life concept. Insurance agent presents a toy that symbolizes the coverage.
Our Methodology
To create a list of the best health insurance stocks to buy, we sifted through multiple ETFs and internet rankings. We then analyzed Insider Monkey’s Q1 2024 database to select the stocks that are most widely held by hedge funds. The following companies, ranked by the number of hedge funds that own their stocks, provide health insurance services in the United States and/or internationally. Why care about what hedge funds do? The reason is simple: our research shows that you can outperform the market by mimicking the top holdings of the best hedge funds. Our quarterly newsletter strategy selects 14 small and large stocks every quarter, which have returned 275% since May 2014 and outperformed the benchmark by 150 percentage points (more here).
Healthcare professionals work on computers and leverage the company’s digital solutions to improve the quality of care for consumers.
Elevance Health, Inc. (NYSE:Electronic Level)
Number of hedge fund holders: 79
Elevance Health, Inc. (NYSE:ELV), formerly known as Anthem, Inc., is a health insurance company operating in the United States through its subsidiaries. The company administers Blue Cross and Blue Shield plans in 14 states and is licensed to sell health insurance nationwide. Elevance offers a variety of health plans, including employer-sponsored and individual plans, Medicare Advantage, Medicare Supplement and Medicaid.
In early April, Mizuho Securities revised its financial outlook for Elevance Health, Inc. (NYSE:ELV), raising its price target for the company to $585 from $575 previously and maintaining its buy rating. The decision was made following an analysis of Elevance Health, Inc. (NYSE:ELV)’s adjusted EPS forecast for the next few years. Mizuho Securities increased Elevance Health, Inc. (NYSE:ELV)’s adjusted EPS forecast by $0.10 each to $37.30 in 2024 and $41.60 in 2025. However, the company’s EPS forecast for 2026 remains unchanged at $46.35, indicating an 11% increase year over year. Additionally, Mizuho FG’s 2024 medical loss ratio (MLR) forecast for Elevance Health, Inc. (NYSE:ELV) is now 87.0%, after the first quarter MLR was in line with expectations at 85.6%. Elevance Health’s (NYSE:ELV) recent partnership with private equity firm Clayton, Dubilier & Rice (CD&R) also aims to expand its primary care services, and Mizuho FG is positive about the move, seeing it as complementary to the company’s existing value-based and primary care services.
As of the end of the March quarter of this year, 79 hedge funds in Insider Monkey’s database reported holdings in Elevance Health Inc. (NYSE:ELV), down from 83 in the previous quarter. These funds’ total holdings total more than $5.73 billion.
Overall ELV 3rd place Check out our list of the best health insurance stocks to buy. The 10 Best Health Insurance Stocks to Buy Let’s take a look at other health insurance stocks that hedge funds are watching. While we see potential in ELV, we believe AI stocks have a better chance of delivering higher returns in a shorter time frame. If you’re looking for AI stocks with better prospects than ELV but trading at less than 5x, check out our report. Cheapest AI Stocks.
Read next: Analyst sees $25 billion in new ‘opportunity’ for NVIDIA and Jim Cramer’s 10 stock recommendations for June.
Disclosures: None. This article was originally published on Insider Monkey.
