In this article, we discuss the top 10 health insurance stocks to buy. If you want to read about some more health insurance stocks, go directly to Top 5 Health Insurance Stocks to Buy.
The health insurance industry has rapidly evolved over the past few years as insurer participation, pricing, and advanced plans drive innovation within the sector. According to a report by consulting firm McKinsey, 55 new insurers entered the market in 2022, representing a 21% increase over the past year, and marking the highest growth in participation in the industry since 2015, when participation had grown by around 26%. Over the past four years, product offerings have also increased, nearly tripling with half of that growth happening between 2021 and 2022.
Tech-enabled insurance plans have contributed most to these growth numbers, per data gathered by the consulting firm, led by firms like Oscar and Bright Health. Some of the other prominent names in the insurance sector that have growth catalysts include Humana Inc. (NYSE:HUM), Cigna Corporation (NYSE:CI), and MetLife, Inc. (NYSE:MET). Another interesting trend in the sector is the participation of exclusive provider organization plans. These have quadrupled to 36% as a share of all plan type offerings.
Total health expenditure is expected to continue on an upward trend across the globe for the next five years. This growth is closely correlated with industry revenues in the health insurance world. However, McKinsey has cautioned that macro uncertainty will persist in part because the enhanced premium subsidies created by the American Rescue Plan Act are due to expire at the end of 2022. If these subsidies are not renewed, pricing and consumer participation may face headwinds in the coming months.
Our Methodology
The companies that operate in the health insurance sector were selected for the list. In order to provide readers with some context for their investment choices, the business fundamentals and analyst ratings for the stocks are also discussed. Data from around 900 elite hedge funds tracked by Insider Monkey in the second quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.
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Top Health Insurance Stocks to Buy
10. Manulife Financial Corporation (NYSE:MFC)
Number of Hedge Fund Holders: 15
Manulife Financial Corporation (NYSE:MFC) provides financial products and services internationally. It is one of the best insurance stocks to invest in. On October 12, Barclays analyst John Aiken maintained an Overweight rating on Manulife Financial (NYSE:MFC) stock lowered the price to C$29 from C$30, noting that the continued decline in equity valuations driven by lower asset levels within the wealth operations and seed losses will likely dampen earnings growth in the quarter.
At the end of the second quarter of 2022, 15 hedge funds in the database of Insider Monkey held stakes worth $155 million in Manulife Financial Corporation (NYSE:MFC), compared to 19 in the preceding quarter worth $517.5 million.
Just like Humana Inc. (NYSE:HUM), Cigna Corporation (NYSE:CI), and MetLife, Inc. (NYSE:MET), Manulife Financial Corporation (NYSE:MFC) is one of the best insurance stocks to buy according to hedge funds.
In its Q2 2022 investor letter, Harding Loenver, an asset management firm, highlighted a few stocks and Manulife Financial Corporation (NYSE:MFC) was one of them. Here is what the fund said:
“Manulife Financial Corporation (NYSE:MFC), the Canadian life insurer operating primarily in North America and Asia, is a new holding. Manulife offers a full suite of life insurance products as well as retirement and wealth management services. While the wealth management and retirement products appeal to the aging populations of the Western world, long-term life insurance products address the needs of the growing number of middle-class families in places like China and southeast Asia. COVID-19-induced lockdowns in China brought the shares down to a significant discount to our estimate of long-term value. The holding now serves as a nice diversifier to our Asia-centered insurers AIA and Ping An.”
9. Clover Health Investments, Corp. (NASDAQ:CLOV)
Number of Hedge Fund Holders: 11
Clover Health Investments, Corp. (NASDAQ:CLOV) operates as a medicare advantage insurer in the United States. It is one of the top insurance stocks to invest in. On July 14, Clover Health Investments said that it will offer Medicare Advantage plans in 13 new counties across South Carolina, Tennessee, and Georgia. The company said that eligible people will be able to sign up for Clover’s plans during the Medicare Advantage Annual Enrolment Period from October 15 to December 7.
On August 9, Citi analyst Jason Cassorla maintained a Neutral rating on Clover Health Investments, Corp. (NASDAQ:CLOV) stock and raised the price target to $3.50 from $3, highlighting the earnings beat of the firm in the second quarter.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Two Sigma Advisors is a leading shareholder in Clover Health Investments, Corp. (NASDAQ:CLOV), with 2.88 million shares worth more than $6.2 million.
8. American Equity Investment Life Holding Company (NYSE:AEL)
Number of Hedge Fund Holders: 14
American Equity Investment Life Holding Company (NYSE:AEL) provides insurance products in the United States. It is one of the major insurance stocks to invest in. On January 7, Brookfield Asset Management Reinsurance said it has purchased an additional 6,755,000 shares of common stock of American Equity Investment Life Holding Company, bringing its total combined equity interest in AEL to nearly 16%.
On October 7, Piper Sandler analyst John Barnidge maintained an Overweight rating on American Equity Investment Life Holding Company (NYSE:AEL) stock and raised the price target to $47 from $46.
At the end of the second quarter of 2022, 14 hedge funds in the database of Insider Monkey held stakes worth $103 million in American Equity Investment Life Holding Company (NYSE:AEL), compared to 17 in the previous quarter worth $155.7 million.
In its Q2 2022 investor letter, First Pacific Adivsors, an asset management firm, highlighted a few stocks and American Equity Investment Life Holding Company (NYSE:AEL) was one of them. Here is what the fund said:
“American Equity Investment Life Holding Company (NYSE:AEL), a leading writer of fixed index annuities, has continued to transition to its American Equity Investment (AEL) 2.0 business model. The plan’s main goals are to diversify the company’s assets into a broader array of investments, including private debt through strategic partnerships, and to increase its use of reinsurance to free up capital. We think this is an interesting, but somewhat aggressive plan. Thus far, the results have been impressive, but we continue to monitor the credit quality of their assets as they move toward achieving their target of having 40% of their portfolio invested in private assets, up from 15.4%.”
7. Teladoc Health, Inc. (NYSE:TDOC)
Number of Hedge Fund Holders: 32
Teladoc Health, Inc. (NYSE:TDOC) provides virtual healthcare services in the United States and internationally. It is one of the elite insurance stocks to invest in. On September 26, Teladoc Health said it was providing free 24/7 general medical telehealth visits to Florida residents. Individuals in Florida who cannot access medical care because of Hurricane Ian can now seek treatment from a licensed healthcare professional for any non-emergency illness by calling Teladoc directly.
On October 11, Barclays analyst Steve Valiquette maintained an Equal Weight rating on Teladoc Health, Inc. (NYSE:TDOC) stock and lowered the price target to $33 from $40, highlighting that the company’s Q3 earning outlook was positive.
At the end of the second quarter of 2022, 32 hedge funds in the database of Insider Monkey held stakes worth $1.2 billion in Teladoc Health, Inc. (NYSE:TDOC), compared to 36 the preceding quarter worth $1.97 billion.
In its Q1 2022 investor letter, RiverPark Funds, an asset management firm, highlighted a few stocks and Teladoc Health, Inc. (NYSE:TDOC) was one of them. Here is what the fund said:
“Teladoc Health, Inc. (NYSE:TDOC) is the largest telehealth provider in the US and has recently begun to expand internationally. TDOC’s platform enables an ever-expanding list of patient-doctor interactions (including those for primary health care, mental health issues and chronic condition management) to transition from an on-site visit to one that can be done remotely with full video- based interaction. TDOC provides its platform of services on both a business-to-business and direct-to-consumer basis, through monthly subscription-based relationships. For its core business-to-business clients, the company contracts with a wide range of entities, including large scale employers (the company currently contracts with over 50% of the Fortune 500), health plans, health systems, and medical insurance companies, which currently cover more than 50 million members. For these customers, the company provides a win-win-win, as patients spend no time traveling and less time waiting, doctors are more efficient seeing more patients in less time, and payers (employers and plan sponsors) save money while being able to offer a highly popular additional benefit for their employees. This B to B market is projected to be a +$100 billion market opportunity and TDOC is the clear global market leader. For its direct-to- consumer clients, the company provides a growing suite of services for individuals to have affordable access to on-demand and scheduled medical services, for which their current insurance does not provide reimbursement (such as extended mental health counseling) (…read more)
6. Molina Healthcare, Inc. (NYSE:MOH)
Number of Hedge Fund Holders: 34
Molina Healthcare, Inc. (NYSE:MOH) provides managed health care services to low-income families and individuals under the Medicaid and Medicare programs and through the state insurance marketplaces. It is one of the prominent insurance stocks to invest in. On September 26, Molina Healthcare, UnitedHealth Group, and Centene Corporation were selected by the Department of Health and Human Services in Nebraska to administer the state’s Medicaid program known as Heritage Health. This is a five year contract which also includes options for two one-year renewals.
On October 3, JPMorgan analyst Calvin Sternick initiated coverage of Molina Healthcare, Inc. (NYSE:MOH) stock with an Overweight rating and a $360 price target, noting that the company’s focus on lower income demographics and cost management would sustain its industry-leading margin profile.
At the end of the second quarter of 2022, 34 hedge funds in the database of Insider Monkey held stakes worth $1.4 billion in Molina Healthcare, Inc. (NYSE:MOH), compared to 36 in the preceding quarter worth $1.7 billion.
In addition to Humana Inc. (NYSE:HUM), Cigna Corporation (NYSE:CI), and MetLife, Inc. (NYSE:MET), Molina Healthcare, Inc. (NYSE:MOH) is one of the best insurance stocks to buy according to hedge funds.
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Disclosure. None. Top 10 Health Insurance Stocks to Buy is originally published on Insider Monkey.
