Seth Klarman Stock Portfolio: Top 10 Stock Picks

8. Humana Inc. (NYSE:HUM)

Total Number of Shares Owned: 420,000

Total Value of Shares Owned: $156,933,000

Number of Hedge Fund Investors: 71

In the second quarter of 2024, Humana Inc. (NYSE:HUM) posted earnings that beat expectations, with adjusted earnings per share (EPS) of $6.96, well above the forecasted $5.85. Revenue also increased to $29.54 billion, supported by higher Medicare Advantage premiums and growth in the membership base. Although overall medical membership slightly declined, Medicare Advantage membership grew from 5.27 million to 5.62 million over the past year, which is a positive indicator of Humana Inc. (NYSE:HUM)’s focus on this key segment.

One of the driving forces behind Humana Inc. (NYSE:HUM)’s potential is the arrival of its new CEO, Jim Rechtin, in July 2024. His leadership is seen as a turning point for Humana Inc. (NYSE:HUM), and many analysts believe this could accelerate its recovery and strategic initiatives. Humana Inc. (NYSE:HUM)’s innovative approach, particularly in integrating home care, pharmacy services, and healthcare centers, is expected to improve health outcomes while reducing costs over time. This forward-thinking strategy is essential to addressing rising healthcare expenses and positioning Humana Inc. (NYSE:HUM) for long-term success.

Analysts have expressed optimism about Humana’s near-term future, particularly due to operational improvements. While inpatient admissions are aligned with expectations, Humana Inc. (NYSE:HUM) has managed to keep unit costs favorable, further strengthening its outlook. Additionally, Humana Inc. (NYSE:HUM)’s management is expected to raise its earnings guidance for the rest of 2024, reflecting confidence in its ongoing turnaround efforts.

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.”