Do You Think Humana (HUM) is Benefitting From Favorable Secular Trends?

Baron Funds, an investment management company, released its “Baron Health Care Fund” third quarter 2022 investor letter. A copy of the same can be downloaded here. In the third quarter, the fund declined 6.01% compared to a 4.72% decline for the Russell 3000 Health Care Index. The fund’s underperformance in the quarter was attributed to poor stock selection. In addition, please check the fund’s top five holdings to know its best picks in 2022.

Baron Funds highlighted stocks like Humana Inc. (NYSE:HUM) in the third quarter 2022 investor letter. Headquartered in Louisville, Kentucky, Humana Inc. (NYSE:HUM) is an American health and well-being company. On October 17, 2022, Humana Inc. (NYSE:HUM) stock closed at $498.79 per share. One-month return of Humana Inc. (NYSE:HUM) was -0.82% and its shares gained 12.98% of their value over the last 52 weeks. Humana Inc. (NYSE:HUM) has a market capitalization of $63.124 billion.

Here is what Baron Funds specifically said about Humana Inc. (NYSE:HUM) in its Q3 2022 investor letter:

“We added to our position in Humana Inc. (NYSE:HUM), a managed health care company which we believe is benefiting from favorable secular trends, including the aging of the population, increasing adoption of Medicare Advantage over traditional Medicare, and the shift to value-based health care. Humana has two businesses, a health plan business and a health care services business. The health plan business is focused on the Medicare Advantage (MA) program, a government program under which the Center for Medicare & Medicaid Services (CMS) contracts with private sector health insurance companies to provide health insurance benefits in exchange for contractual payments from CMS. Overall Medicare enrollment is growing as the baby boomer generation ages into the Medicare program and MA is growing faster than traditional Medicare because MA companies provide additional benefits like dental, vision, and hearing coverage at no extra cost. These trends should continue to drive growth in MA enrollment for many years. Humana is a strong number two player in MA after UnitedHealth and has typically grown its MA business faster than the market.

In Humana’s health care services business, which is branded CenterWell, the company provides pharmacy services, home care services, and operates primary care clinics. Humana is one of the largest senior-focused, value-based primary care organizations and is also the largest home health organization in the country. Humana’s health care services business is higher margin and faster growing than the health plan business and should help drive margin expansion and earnings growth for the consolidated business. At a recent Investor Day, management provided a 2025 adjusted EPS growth target of $37, representing a 14% CAGR from 2022.”

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Humana Inc. (NYSE:HUM) is not on our list of 30 Most Popular Stocks Among Hedge Funds.  As per our database, 69 hedge fund portfolios held Humana Inc. (NYSE:HUM)  at the end of the second quarter, which was 66 in the previous quarter.

We discussed Humana Inc. (NYSE:HUM) in another article and shared the best stocks to buy according to Jonathan Bloomberg’s BloombergSen. In addition, please check out our hedge fund investor letters Q3 2022 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.