Carroll specifically recommended UnitedHealth and Health Net .
“It’s probably going to work higher from here with some kind of reform that doesn’t kill these guys, which is the way we’re looking,” he said. “Companies like Health Net are becoming a better focused company in the Southeast, more regionalized, better packaged for sale. Health care reform is going to survive consolidation.”
However, there is still a lot of uncertainty around companies that garner most of their revenues and profits from the Medicare advantage program, such as Humana, HealthSpring and Universal American, said Carroll.
“At the same time, I want to have a more positive view long-term on the Medicare population, given that Medicare eligibility is exploding across the country,” he said.
In the meantime, Joy said the market is "breathing a sigh of relief" because the health care reform is expected to be incremental and not the sweeping legislation that had been discussed a few months ago.
“So I don’t think this is a big hurdle for the market,” he said. “[But] I think this makes this landscape for the insurance industry very scary from an investment point of view—I’d stay away,” said Joy.
However, he pointed to UnitedHealth as an exception, saying the stock is “in pretty good shape.”
Carroll does not own shares of UnitedHealth. Carroll has investment banking clients who own shares of AGP, CVH, MOH.
No immediate information was available for Joy or his firm.