Heartland Advisors, an investment management company, released its “Heartland Mid Cap Value Fund” second quarter 2023 investor letter. A copy of the same can be downloaded here. In the second quarter, the portfolio returned 4.78% compared to a 3.86% gain for the Russell Midcap Value Index. Stock selection mainly in the Technology, Consumer Discretionary, and Utilities sectors led the fund to outperform in the quarter. The fund’s consistent performance was due to the positive stock selection in seven of the eleven sectors. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Heartland Mid Cap Value Fund highlighted stocks like Centene Corporation (NYSE:CNC) in the second quarter 2023 investor letter. Centene Corporation (NYSE:CNC) is a healthcare enterprise headquartered in St. Louis, Missouri. On July 12, 2023, Centene Corporation (NYSE:CNC) stock closed at $63.80 per share. One-month return of Centene Corporation (NYSE:CNC) was -3.51%, and its shares lost 25.61% of their value over the last 52 weeks. Centene Corporation (NYSE:CNC) has a market capitalization of $35.246 billion.
Heartland Mid Cap Value Fund made the following comment about Centene Corporation (NYSE:CNC) in its second quarter 2023 investor letter:
“Healthcare. Centene Corporation (NYSE:CNC) is one of the largest managed health care insurance providers in the U.S. and the largest player in Medicaid. The stock has underperformed this year, as CNC faces reimbursement headwinds including a reduction in its 2024 Medicare Advantage premiums and higher healthcare utilization from the return of elective procedures. Investors also fear a potential loss of insured lives when Medicaid eligibility, which was expanded during the pandemic, gets redetermined in 2023-2024.
CNC’s historical results have lacked the consistency demonstrated by premier large managed care companies. However, since 2021, the company has steadily upgraded its leadership ranks from the CEO on down through the executive ranks and line-of-business leaders. CNC’s executive leadership is comprised of industry veterans with a demonstrated record of success. Their executive compensation is clearly aligned with shareholder value creation, and they recently bought large amounts of CNC stock personally in the open market, demonstrating confidence in their prospects. Self-help initiatives are well underway and include noncore divestitures, material expense streamlining, improved digital capabilities, improved provider contracting, and meaningful share repurchases.
In our estimation, the market is too focused on near-term overhangs that will prove temporary and disregards the substantial value creation opportunities that lie ahead. CNC trades at just 10X 2023 earnings compared to peers valued at mid/upper teens P/E ratios. After a brief pause caused by the reimbursement headwinds in 2024, we expect CNC to resume its 12-15% EPS growth rate, comparable to leading industry operators. This should help close the valuation gap.”
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Centene Corporation (NYSE:CNC) is not on our 30 Most Popular Stocks Among Hedge Funds list. As per our database, 61 hedge fund portfolios held Centene Corporation (NYSE:CNC) at the end of first quarter which was 58 in the previous quarter.
We discussed Centene Corporation (NYSE:CNC) in another article and shared the list of biggest health insurance companies in the US. In addition, please check out our hedge fund investor letters Q2 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
