We recently published a list of 10 Cheapest Stocks to Buy On Robinhood. In this article, we are going to take a look at where Centene Corporation (NYSE:CNC) stands against other cheapest stocks to buy on Robinhood.
While the market has been on an upward trajectory for nearly two years now, the combination of seasonal trends, strong retail, and corporate activity, and positive market momentum following the November election still suggests a potential for continued growth in U.S. equities.
Goldman Sachs’ Scott Rubner predicts a year-end rally that will push the S&P to 6,200 points as reported by Bloomberg on November 25. He attributes this potential rally to growing retail enthusiasm in equities and crypto, seasonal trading patterns, and increasing corporate buyback demand.
Rubner noted that the recent consolidation phase is typical, and highlighted significant inflows into U.S. equities, with the broader market gaining over 3% since the November 5 presidential vote and the Russell 2000 rising 6.5%. Historically, strong market performance in election years tends to extend into January, with the capital being deployed at the start of the new year.
READ ALSO: Jim Cramer’s Lightning Round: 9 Stocks in Spotlight and 10 Best Renewable Energy Penny Stocks to Invest In.
Strategic Investment Moves in a Shifting Economy
In an interview with Seana Smith and Madison Mills of Yahoo Finance, Jim Smigiel, SEI’s Chief Investment Officer, highlighted several key insights for investors, in light of President-elect Donald Trump’s pro-growth policies. He warned that these policies could lead to higher inflation and rising interest rates, which may impact investment strategies. For investors, the focus should be on understanding how inflation and rates can affect different assets and staying prepared for potential shifts in the market.
Smigiel sees opportunities in small-cap stocks, value stocks, and financials, which are expected to benefit from the current reflationary environment. He suggested investors consider diversifying their portfolios to reduce reliance on highly concentrated growth sectors like tech. Active management, where professional fund managers select investments, could also be a useful strategy to broaden exposure and adapt to market changes.
While higher rates could eventually pose challenges, Smigiel noted that small-cap stocks remain attractive for now due to improved debt structures, providing a window of opportunity until around 2026. Investors should keep an eye on rising yields, as it might signal a need to shift toward more defensive investments. Diversification remains critical in managing risks during this period.
Our Methodology
For this article, we checked all the large-cap companies trading on Robinhood with at least 50% positive analyst ratings. We narrowed our list to nearly 40 stocks that were trading below a forward price-to-earnings multiple of under 15. We also skipped the stocks that were trading above or at their industry median despite trading below a PE ratio of 15. Finally, we chose the 10 cheapest stocks to buy based on their average analyst price target upside as of November 25 (pre-market open). These stocks are also popular among hedge funds.
Why are we interested in 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).
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Centene Corporation (NYSE:CNC)
Market Cap: $30.8 billion
FWD PE Ratio: 8.84
Average Price Target Upside: 35.83%
Centene Corporation (NYSE:CNC) is a U.S.-based healthcare company providing services to under-insured families, businesses, and military groups. It operates through Medicaid, Medicare, and Commercial segments, offering health plans, insurance products, and government contract services like TRICARE. The company also manages clinical healthcare facilities, pharmacies, dental care, and speech therapy.
Centene’s (NYSE:CNC) Q3 results highlight solid progress in Medicaid stabilization, Medicare Star Ratings improvement, and marketplace growth. Moreover, the company remains on track to achieve its full-year goals while positioning itself for long-term success. The company’s Q3 2024 results exceeded expectations, with adjusted EPS of $1.62 driven by favorable tax timing. Medicaid membership stabilized at 13 million as redeterminations concluded, with 30% of disenrolled members returning, though gaps caused temporary challenges. The Medicaid Health Benefits Ratio (HBR) was 93.1%, and rate adjustments are projected at 4.5%-5% in the year’s second half.
Medicare Star Ratings improved, with 46% of members in 3.5-star plans or higher for 2025, up from 23%. Medicare Advantage revenue is expected to reach $14-$16 billion in 2025. Marketplace membership grew 22% year-over-year to 4.5 million, with stable margins forecasted. Operational efforts, including AI for provider contracts, supported $36.9 billion in Q3 revenue. Finally, despite cash flow impacts from rate increases, Centene (NYSE:CNC) repurchased $1.6 billion in shares.
Oakmark Select Fund stated the following regarding Centene Corporation (NYSE:CNC) in its Q2 2024 investor letter:
“Centene Corporation (NYSE:CNC) is one of the largest health insurers in the U.S. The company specializes in three major government-sponsored programs: Medicaid, Marketplace and Medicare Advantage, each of which benefits from long-term secular tailwinds. In Medicaid, states are steadily outsourcing their programs to companies like Centene to reduce costs and improve care quality. Managed Medicaid penetration has increased throughout the past decade and we expect further gains over time. In Marketplace, growth is driven by the trend toward more individuals buying health insurance. Centene holds the #1 market share in both of these programs and is well positioned to capitalize on their continued growth. Finally, we believe management is successfully turning around Centene’s Medicare business and expect the division to generate positive earnings over time. After adjusting for losses stemming from Centene’s Medicare business, we were able to purchase shares at a single-digit P/E multiple, which we think is too cheap for a leading, secularly growing Medicaid company and an improving Medicare business.”
Overall, CNC ranks 10th on our list of cheapest stocks to buy on Robinhood. While we acknowledge the potential of CNC 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 time frame. If you are looking for an AI stock that is more promising than CNC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
