Is Humana Inc. (HUM) A Smart Long-Term Buy?
Oakmark Funds, an investment management firm, published its “Oakmark Equity and Income Fund” first quarter 2021 investor letter – a copy of which can be seen here. A return of 10.3% was reported by the fund for the Q1 of 2021, outperforming its Lipper Balanced Fund benchmark that delivered a 5.4% return for the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.
Oakmark Equity and Income Fund, in their Q1 2021 investor letter, mentioned Humana Inc. (NYSE: HUM) and shared their insights on the company. Humana Inc. is a Louisville, Kentucky-based health insurance company that currently has a $53.3 billion market capitalization. Since the beginning of the year, HUM delivered a 0.72% return, extending its 12-month gains to 17.32%. As of April 12, 2021, the stock closed at $413.21 per share.
Here is what Oakmark Equity and Income Fund has to say about Humana Inc. in their Q1 2021 investor letter:
"The third new purchase was Humana, the industry leader and near pure play in the fastest growing sector of managed care, Medicare Advantage. Each year, more seniors choose Medicare Advantage over traditional Medicare due to the compelling combination of lower costs and expanded benefits. Humana’s scale advantages and focus on senior care allow the company to make targeted investments in its members’ health, resulting in fewer unnecessary hospitalizations and lower chronic care costs. Much of these savings are then reinvested in the health plan, resulting in a continuously improving customer value proposition. The company’s brand also resonates well in the marketplace and has helped drive double-digit annual membership growth over the past decade—well above the rest of the industry. Further, we believe Humana has a long runway ahead as it benefits from an aging population and continued conversion of the approximately 60% of seniors who are still enrolled in traditional Medicare. Yet Humana’s shares are currently trading at a nearly 20% discount to the S&P 500 earnings multiple, which we believe doesn’t give the company enough credit for its durable competitive advantages and strong secular growth outlook."
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Our calculations show that Humana Inc. (NYSE: HUM) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Humana Inc. was in 59 hedge fund portfolios, compared to 61 funds in the third quarter. HUM delivered a -2.19% return in the past 3 months.
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Disclosure: None. This article is originally published at Insider Monkey.
