5 Most Undervalued Healthcare Stocks To Buy According To Hedge Funds

1. The Cigna Group (NYSE:CI)

Number of Hedge Fund Holders: 76

The Cigna Group (NYSE:CI) shares have gained about 31% over the past year. Still, The Cigna Group (NYSE:CI) looks undervalued as its PE ratio is under 15 as of February 24.  Recently, The Cigna Group (NYSE:CI) made its shareholders happy when it upped its dividend by 10%. Cigna (NYSE:CI) announced a quarterly dividend of $1.23 per share. The dividend is payable on March 23.

At the end of the last quarter of 2022, 76 hedge funds in Insider Monkey database reported owning stakes in The Cigna Group (NYSE:CI). The total value of these stakes as of the end of December 2022 was $4.4 billion. The biggest stakeholder of The Cigna Group (NYSE:CI) during this period was Rajiv Jain’s GQG Partners which had a massive $797 million stake in the firm.

Baron Funds made the following comment about Cigna Corporation (NYSE:CI) in its Q4 2022 investor letter:

“We initiated a position in Cigna Corporation (NYSE:CI), a health services organization with two primary segments, Cigna Healthcare and Evernorth. Cigna Healthcare provides health insurance products, including a business in which Cigna provides administrative services only to plan sponsors (employers, unions, and other groups). Evernorth provides a portfolio of health care services, including pharmacy benefit management (PBM) services, care delivery services, data and analytics solutions, and distribution of specialty drugs. Each segment has a portion of business that provides steady, predictable growth. These foundational businesses, which account for roughly 60% of total revenue, include the U.S. commercial business, the PBM business, and international. The other 40% of revenue comes from higher-growth businesses, including the specialty pharmacy business, care delivery services, and Medicare Advantage. Management targets 10% to 13% annual EPS growth over the long term. The stock trades at a significant discount to industry peers because of the company’s commercial health insurance and PBM business mix. We think the PBM business will benefit from the biosimilar wave in the next few years, and as Cigna’s higher growth businesses become a bigger percentage of the overall mix, we think the stock can appreciate at least in line with its annual EPS growth with potential for valuation expansion.”

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