CNC

Publicly traded companies mentioned herein: Centene Corp (CNC), Cigna Corporation (CI), Humana Inc (HUM), UnitedHealth Group (UNH), WellCare Health Plans, Inc (WCG)

Highlights

The presenter is long shares of Centene (CNC) as he believes the “Medicare For All” threat has significantly diminished. Recent sentiment shift against the managed care companies (Centene, Humana, Wellcare, etc.) reached a major turning point when Elizabeth Warren stated that the rollout process for the program would take 3 years. He views multiple positive catalysts going forward, namely, the removal of the “Medicare for All” overhang, the ACAs unconstitutionality ruling being overturned, and further expansion into high growth exchange business. CNC is currently trading at an 11x earnings multiple and the presenter sees a trajectory to $6 EPS in 2021. He believes the stock is lagging behind its peers, should trade closer to the sector’s average (~15x), and sees 50% upside from the current price of $60 to $80- $90.

As the largest Medicaid MCO in the US focused on low-income and high-risk populations, the presenter likes to think of Centene as “the UnitedHealth of Medicaid.” The company operates a full-service PBM (RxAdvance) and boasts a combination of assets similar to UnitedHealth’s model. As a result, as Centene expands into new regions through the ACA exchanges, it will be able to leverage provider networks successfully as it is geared towards this segment of the population.