Although the health care industry is not immune to a sluggish economy, the sector presents some attractive opportunities, said Carl McDonald, a senior analyst at Oppenheimer & Co.
“As bad as the market has been, the health insurers are down about 60 percent this year on average,” he said. “Beyond insurance, I think you have seen some companies that either have monopolies on drugs or some players with particular products.”
McDonald is bullish on Humana , Aetna and WellCare .
“The one that I like the most there is Humana; I think that’s going to be a great stock into 2009, mainly because the company has a tremendous amount of cash,” McDonald said.
Humana, a company with a $6 billion market cap, has $1.2 billion in cash today, he said. McDonald expects it to generate another billion dollars over the next six months and about some $2.5 billion in 2009 and 2010.
Aetna, which gives guidance over the next weeks, is also poised to do well in 2009, he said.
“They’re going to guide earnings up ten to twelve percent,” he said. “The company has been the best fundamental performer this year.”
The services side also presents opportunity, said Arthur Henderson, Jefferies & Company managing director and analyst.
“If you look at areas where there are non-elective procedures, things where there are no discretionary spend, you find really some very attractive valuations,” he said.
Henderson likes Amedisys, Gentiva Health Services , Almost Family and LHC Group.