Goldman Sachs’ Stocks With Highest Consensus Returns: 42 Stocks With The Highest Consensus ROE

28. Humana Inc. (NYSE:HUM)

Consensus ROE: 10%

Number of Hedge Fund Investors in Q2 2024: 71

Humana Inc. (NYSE:HUM) is a health insurance and health care provider headquartered in Louisville, Kentucky. The firm works with Medicare and Medicaid, and it also operates pharmacies and care centers. Humana Inc. (NYSE:HUM) relies heavily on Medicare Advantage payments for its revenue, and during H1 2024, 98.6% of its $57.2 billion in revenue came through its premiums business. Within premiums, Medicare accounted for 89% of the total $56 billion in revenue. Consequently, any turbulence that Humana Inc. (NYSE:HUM) faces when it comes to Medicare impacts its shares by quite a bit. This was also the case in October when the stock dropped by 22% after the firm revealed that data showed that 25% of its members were enrolled for four star or better Medicare Advantage plans. Since this reduces the bonus that the firm is paid,  investors reacted accordingly especially as the news came after delays to the firm’s ability to increase prices. However, Humana Inc. (NYSE:HUM) stressed that it was working with CMS to see whether there were any discrepancies in the data. Additionally, as the stock has already accounted for the lower ratings, Humana Inc. (NYSE:HUM) could see tailwinds if its outlook improves.

Artisan Value Fund mentioned Humana Inc. (NYSE:HUM) in its Q1 2024 investor letter. Here is what the fund said:

“As the market has been grinding higher and higher, it likely comes as no surprise that value investors like us haven’t been very active in terms of new purchases. In Q1, we added one new name to the portfolio: Humana Inc. (NYSE:HUM). Humana is a leading US managed health care company serving approximately 17 million members in its medical benefit plans, as well as nearly 5 million members in its specialty products. After a few years of benign costs, mainly related to lower utilization trends during COVID in which the managed care industry enjoyed expanding profits and strong growth, utilization has ticked higher, driving up costs. Due to the timing of annual negotiated repricing for Medicare Advantage plans in June, Humana won’t be able to adjust pricing higher until the following year. In the interim, this is problematic for near-term earnings. Naturally, this has weighed on Humana’s stock price. The main drivers for the business remain intact, however, and there are no large fundamental shifts impacting the industry’s long-term outlook. As opportunistic value investors, we took advantage of what we believe is a temporary air pocket in earnings to purchase shares trading at historic lows on most valuation metrics using our estimates of normalized results.”