The health insurance industry overall has been one of the best performing sectors not only this year, but for the past five years. With news of mergers and acquisitions in the space becoming almost a routine phenomenon, investors in most of these companies have seen the value of their holdings increasing at an impressive rate month after month. However, there are also a large number of investors who missed the trend initially and have been contemplating investing in the sector ever since, especially after two of the largest names in the space announced large value acquisitions recently. To help such investors, we at Insider Monkey decided to look at the latest portfolio data submitted by the funds we cover in our database and figure out health insurance stocks, which smart money favors the most. Read further to know which healthcare plan providers made it to our list.
We track hedge funds and prominent investors because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 50 most popular large-cap stocks among hedge funds had a monthly alpha of about 6 basis points per month between 1999 and 2012; however the 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points during the same period. This means investors would have generated 10 percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas. We have been tracking the performance of these stocks since the end of August 2012 in real time and these stocks beat the market by over 60 percentage points (118% return vs. S&P 500’s 57.6% gain) over the last 36 months (see the details here).
5. CVS Health Corp (NYSE:CVS)
Investors with Long Positions (as of June 30): 57
Aggregate Value of Investors’ Holdings (as of June 30): $2.52 Billion
Rhode Island-based CVS Health Corp (NYSE:CVS) saw its popularity among hedge funds decline marginally during the second quarter, when its shares remained largely flat, with the number of hedge funds tracked by us that reported a stake in the company coming down by two. However, the aggregate value of investors’ holdings in the company saw a slight increase of $32 million during the same period. Although the recent market volatility has shaved off a large amount of gains, shares of CVS Health Corp (NYSE:CVS) are still trading in the green for the year. The company recently announced that it has reached a $48 million settlement in a lawsuit against it which alleged that it had fraudulently concealed a big loss of revenue in its pharmacy benefits management business and its shares nosedived after this came to light. On September 22, the company announced that it has begun private exchange offers for eligible holders to exchange new 4.75% Senior Notes due 2022 and new 5.00% Senior Notes due 2024. Cliff Asness‘ AQR Capital Management was the largest shareholder of the company at the end of June among the funds tracked by us, owning slightly above 4.8 million shares.