HMOs Have Further Room to Run: Stock Picker

Health maintenance organizations (HMOs) have further room to run, according to Charles Boorady, co-head of health care equity research at Credit Suisse.

“We’re mostly through our first-quarter [earnings] results and we’re seeing a Goldilocks scenarioplay out for health care where health-care consumption is going up enough to draw investors into the sector again, but not so much that the insurance companies can’t exceed profit expectations,” Boorady told CNBC.

Boorady noted the sector has “derisked” even with the implementation of the recent health-care reform. In addition, he maintains an “overweight” rating on managed health care stocks.

“Health-care reform has increased the cost of doing business as a health insurance company,” he explained. “Smaller companies are getting out of the business and we think we’ll see a lot more consolidation in the industry.”

Boorady’s Top Picks:

UnitedHealth

WellPoint

Humana

Coventry Health

______________________________

Scorecard—What He Said:

• Boorady's Previous Appearance on CNBC (Apr. 7, 2011)

______________________________

More Market Intelligence:

• Bulls Betting on Health Care
• 6 Large-Cap Plays For Investors: Pros
• Smaller Stocks May Be First Victims of Fed Pullback

______________________________

CNBC Data Pages:

• Dow 30 Stocks—In Real Time
• Oil, Gold, Natural Gas Prices Now
• Where's the US Dollar Today?

______________________________
CNBC Slideshows:

• America's Healthiest and Sickest States

______________________________
Disclosures:

Boorady has investment banking clients who own shares of AET, AGP, CNC, CVH, HUM, GTS, UNH and WLP.

______________________________

Disclaimer