S&P Sees Better 2013 For Health Insurance Providers
By ETF Professor | December 19, 2012 11:19 PM EST
Following company-specific missteps in the first half of the year, health insurance providers or managed care organizations (MCOs), have been laggards relative to other sub-sectors in 2012. On the heels of improved earnings for the group in the third quarter, S&P Capital IQ sees better earnings and share price performance in 2013.
"While individual and commercial enrollment for the group as a whole has declined over the past few years, given high unemployment rates and reduced affordability amid the tough economy, some MCOs have been realizing higher individual and/or commercial membership through market-share gains or acquisitions," said S&P Capital IQ in a new research note. "Most have also been realizing rising Medicare Advantage enrollment, as well as rising Medicaid enrollment, as states transitioned their Medicaid populations to managed health care to help save money."
While S&P is forecasting similar enrollment trends next year as have been seen over the past three years, the research firm sees "double-digit, group-wide EPS growth."
One ETF investors can use to play a potential rebound in MCOs is the iShares Dow Jones U.S. Healthcare Providers Index Fund (NYSE: IHF). In the 2012, the iShares Dow Jones U.S. Healthcare Providers Index Fund has not been a laggard, posting a gain of 18.3 percent to this point in the year. S&P Capital IQ rates IHF Overweight.
Home to 45 stocks, IHF has nearly $230 million in assets under management and an annual expense ratio of 0.47 percent. Dow component UnitedHealth (NYSE: UNH) and Express Scripts (NASDAQ: ESRX) combine for nearly 26 percent of the ETF's weight. Other top-10 holdings include WellPoint (NYSE: WLP), Humana (NYSE: HUM) and DaVita Healthcare Partners (NYSE: DVA).
As of the end of the third quarter, Warren Buffett's Berkshire-Hathaway (NYSE: BRK-A) owned over 10 million shares of DaVita. S&P Capital IQ has a four-star rating on UnitedHealth.
In the same note, S&P Capital IQ reiterated an Overweight rating on the Health Care Select Sector SPDR (NYSE: XLV), the largest health care ETF. XLV is heavily weighted to pharmaceuticals names such as Johnson & Johnson (NYSE: JNJ) and Pfizer (NYSE: PFE), but the ETF does hold some MCOs. For example, UnitedHealth and Express Scripts are found among XLV's top-10 holdings. XLV has surged 18.6 percent year-to-date.
For more on ETFs, click here.
Most Popular Slideshows
- NFL MNF: Pittsburgh Steelers 30, Houston Texans 23 [PHOTOS]
- 2014 MLB World Series Game 1: San Francisco Giants 7, Kansas City Royals 1 [PHOTOS]
- 2014 MLB World Series - Game 2: Kansas City Royals 7, San Francisco Giants 2 [PHOTOS]
- NFL Thursday Recap - Denver Broncos 35, San Diego Chargers 21: Peyton Manning Has 3 TDs In Easy Win [PHOTOS]
Join the Conversation
- New Zealand Economy Benefits From Australia's Big Investments; Kiwi Down After RNBZ Comments
- ETF Outlook for Thursday, January 2 (FEZ, FXI, SPY, XHB)
- January Second Trading: Always Interesting
- 13 Things Investors Learned In 2013 - Part II
- Are Diversity and Quality the Way to Profit from the Rebound in Gold and Coal?
- Xiaomi Redmi 1S vs. Sharp Aquos Crystal – Specifications, Features And Price Showdown
- ASUS Releases A Teaser Indicating The Arrival of New Zenfone and ZenWatch On October 28
- Boy Stoned To Death For Alleged Rape, Victim Receives Dowry From Militants
- Three Dual SIM Samsung Galaxy Note 4 Duos Variants Comes To China
- Russia is Creating Underwater Combat Robots to Protect its Arctic Territories
- ‘Lone Wolf’ Attack on Canada Parliament Hill Could be ISIS-Related
- Android Lollipop 5.0 Confirmed for Nov 3 Rollout as Nexus 6 Global Release Date is Delayed – Reports