We recently compiled a list of the 10 Blue-Chip Stocks to Buy at 52-Week Lows. In this article, we are going to take a look at where Humana Inc. (NYSE:HUM) stands against the other Blue-Chip Stocks to Buy.
Despite the stock market indices hitting record highs this year, some stocks edged lower and are currently languishing near their 52-week lows. While it’s common practice to stay clear of stocks under pressure, it could sometimes be a costly error. When the shares of solid companies become unpopular due to macroeconomic factors and concerns, it presents a buying chance that value investors seize.
Deteriorating macroeconomics was the catalyst behind some blue chip stocks imploding in a year when the overall market traded higher. As the high interest rate environment helped push inflation close to the recommended 2%, some companies felt the blunt even as the S&P 500 rallied up to 17%.
READ ALSO: 8 Best Warren Buffett Stocks to Buy According to Analysts and 8 Best Value Stocks to Invest In According To Warren Buffett.
Companies whose core business depend on consumer purchasing power were the hardest hit as consumers became cautious amid the high inflation and liquidity pressures. Likewise, as the U.S. economy came under pressure amid the high interest rates depicted by a struggling U.S. labor market and manufacturing sector, investors shunned stocks in the consumer cyclical and energy sectors susceptible to deteriorating economic conditions.
Fast forward, the Fed swinging into action and initiating a 50 basis points interest rate cut to try and prevent the U.S. economy from plunging into recession has presented a new lease of life in the markets. According to market bull and head of research at Fundstrat Global Advisors Tom Lee, the Federal Reserve cutting cycle has the potential to set up the market for a strong rally heading into year-end.
Large-cap stocks, hard-hit by high interest, increasingly present undiscovered investment opportunities in a volatile market. Even though a stock that is at or close to a recent low may seem like a risky investment, large-cap stocks frequently reflect market sentiment rather than underlying problems.
With the overall market remaining bullish as interest rates around the globe drop, professional investors are increasingly taking note of the best blue-chip stocks to buy at 52-week lows. Astute investors know these large-cap stocks’ current valuations might not accurately represent their long-term potential, as most appear to be trading at a discount.
According to Canaccord Genuity analyst Michael Welch, the fourth quarter presents one of the best opportunities to buy undervalued stocks, as it is usually the strongest quarter for stocks. The fact that the quarter often ends positively in three of every four years underscores why investors should be bullish about blue-chip stocks that have pulled back significantly and are showing signs of bouncing back.
According to Welch, now is not the time to fight the Fed or the tape as the market shows signs of edging higher. The analyst believes now is the time to position one’s portfolio for a potential fourth-quarter rally. Investors have a unique opportunity to secure higher dividend yields and long-term capital gains when the market recovers and high-quality stocks bottom out after the recent slump.
Nevertheless, Lee of Fundstrat Global Advisors believes investors should be cautious as the uncertainty around the U.S. presidential election could turn out to be a significant headwind. The uncertainty around former president Donald Trump and Kamala Harris’s economic platforms should make the markets weary and curtail significant gains.
Our Methodology
To make our list of blue chip stocks at 52-week lows, we ranked large-cap firms trading on the NYSE and NASDAQ whose shares are trading at new 52-week lows or are at most 0-10% higher. The blue-chip stocks at 52-week lows with the highest market capitalization were selected, and their share prices are also mentioned. Finally, we ranked the stocks in descending order based on market cap.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Humana Inc. (NYSE:HUM)
52 Week Range: $276.80 – $530.54
Current Share Price: $279.45
Number of Hedge Fund Holders: 71
Market Capitalization as of September 30: $33.64 Billion
Humana Inc. (NYSE:HUM) is one of the best blue chip stocks to buy at 52-week lows as it continues to concentrate on Medicare plan offerings instead of private sector insurance. The company’s competitive edge stems from being a leading provider of Medicare Advantage plans, primarily serving the elderly.
Humana Inc. (NYSE:HUM) continues to be at the forefront of one of the fastest-growing segments of US medical insurance, given US demographic trends and the growing uptake of Medicare Advantage plans among eligible individuals.
The management has attributed disappointing financial results to rising inpatient utilization rates and Medicare Advantage medical costs in recent quarters. Nevertheless, Humana Inc. (NYSE:HUM) has made significant investments in Medicare Advantage, the government-funded program that provides senior citizens with health benefits as they age.
Because Medicare Advantage accounts for the majority of revenue, the company’s earnings are susceptible to higher utilization rates among seniors. Humana has managed these pressures by negotiating with providers and using clinical appropriateness despite rising inpatient costs.
Humana Inc. (NYSE:HUM)’s Medicare business has experienced a notable upswing, contributing to an exceptional performance in the second quarter of 2024 that exceeded forecasts. Revenues in the quarter were up by 10% to $29.5 billion, but earnings per share dropped to $5.62 from $7.66 a year ago in the same quarter.
The business maintained its guidance for benefit ratios and full-year adjusted earnings per share (EPS) for 2024, indicating a promising future for growth, especially in the Medicaid and CenterWell businesses. Moreover, Humana increased its revenue forecast by $3 billion due to growing membership.
Following the steep pullback, the stock trades at a discount relative to the industry standards with a price-to-earnings multiple of 13 while offering a 1.27% dividend yield.
As of Q2 2024, Insider Monkey reported that 71 out of the 912 hedge funds they track held positions in Humana Inc. (NYSE:HUM). Notably, Eagle Capital Management emerged as a leading hedge fund investor with a significant stake in the company, valued at over $1.2 billion.
Diamond Hill Mid Cap Strategy stated the following regarding Humana Inc. (NYSE:HUM) in its Q2 2024 investor letter:
“Other top Q2 contributors included Humana Inc. (NYSE:HUM) and Boston Scientific Corporation. Shares of health insurance company Humana rebounded from their recent downturn, which was tied to investors’ concerns about weaker-than-expected Medicare Advantage rates for 2025 and was the byproduct of an overall difficult operating environment.”
Overall HUM ranks 2nd on our list of 10 Blue-Chip Stocks to Buy at 52-Week Lows. While we acknowledge the potential of HUM as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than HUM, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
