Sicko Trade
By: 
The worst flu season in years is leaving millions miserable but it’s our health care system that’s facing a full blown epidemic. Health insurers Humana, UnitedHealth and WellPoint are struggling with the biggest stock declines in their history.
What happened? In a bid to beat each other among the booming senior population the so-called sickos screwed up. They lowered prices on plans by too much and let too many sick people on board.
So despite the fact that health care spending is going to double within a decade the stocks find themselves in need of a walk-in clinic.
What's the prescription for fast money as this ailing industry searches for an antidote?
Kris Jenner, M.D., Managing Director at T. Rowe Price joins the panel for this conversation. Jenner's fund, the T.Rowe Price Health Sciences Fund, has $2.06 billion in assets under management. Following us a summary of the main points made during the conversation.
What’s going on in the sector?
The issue is that all of these companies make expectations and price their products accordingly, explains Jenner, and some medical costs are higher than where they have priced a good deal of their medical insurance… What this shows is that when these companies make small miscalculations their margins are so thin they have to revise earnings in a major way.
When do they get to re-price on the revenue side?
The products can be re-priced within a year, replies Jenner. It’s painful to go through the adjustments but these companies have an ability to recover in a year.
What are you buying?
I bought Cigna , Humana and Coventry on Wednesday, Jenner says. I think all have the potential to be up at least 25% over the next 12 months.
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Trader disclosure: On Mar.12, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders: Najarian Owns (AMR), (BIIB), (C), (CSCO), (MS), (MSFT), (YHOO); Najarian Owns (COP) Calls; Najarian Owns (FNM) Puts; Finerman's Firm And Finerman Own (CROX); Finerman's Firm Owns (AEO), (DVA), (FNM), (GS), (MSFT), (TSO), (VLO), (YHOO); Finerman's Firm Is Short (IYR), (IJR), (MDY), (IWM), (SPY); Finerman's Firm Is Short (LEH) And Owns (LEH) Puts; Seymour Owns (HAL), (INTC), (MBI), (MER), (MSFT), (TSO), (CSCO), (TMA); Seygem Asset Management Owns (CHL), (EWT),(SSL), (TCL), (TSM), (EEM) Gazprom
