We're buying more shares of a health insurance company immune to international risk

Published Mon, Apr 25 20222:50 PM EDT

We're buying 20 shares of Humana (HUM) at roughly $440.33 each. Following Monday's trade, the portfolio will own 190 shares of Humana, increasing its weighting to about 2.69% from 2.4%. The pressure in the broader markets let up some on Monday. But with sentiment around stocks so poor, we're dipping back into our large, 13%, cash position and buying more shares of health insurance company Humana into weakness. Given that Monday's earlier selloff was all about the global economic growth scare from the ongoing Covid lockdowns in China, we questioned why the purely domestic and slowdown-resistant Humana was down more than the S & P 500 . We think Monday's choppy market represents an opportunity to scale deeper into our newest name. As a reminder, our favorable view of HUM is predicated on our belief that management will be able to fix the Medicare Advantage growth headwinds it experienced earlier in the year through better execution and investment support from a $1 billion value-creating plan. On valuation, we believe Humana fits the profile of growth at a reasonable price, or GARP. The stock currently trades at around 18x forward earnings per share estimates yet those earnings are expected to grow 17% in 2022 and another 12.5% in 2023. Lastly, we want to point out that this purchase is not a call on the company's upcoming quarter. Humana is scheduled to report first-quarter earnings before the opening bell Wednesday. While we hold a generally positive view about the upcoming results using UnitedHealth Group 's medical loss ratio beat as a guidepost, we're adding to our position Monday with hopes of a short-term trade. We are investors and we expect our thesis on Humana accelerating its Medicare Advantage growth will take a few quarters to play out. (Jim Cramer's Charitable Trust is long (HUM). See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Traders work on the floor of the New York Stock Exchange (NYSE) on April 25, 2022 in New York City.

Spencer Platt | Getty Images