We recently compiled a list of the Billionaire Lee Cooperman Says The Market Is Expensive But These 10 Stocks Are Cheap. In this article, we are going to take a look at where The Cigna Group (NYSE:CI) stands against the other cheap stocks.
Leon Cooperman recently shared his conservative outlook on the economy and discussed stocks that he is monitoring during a CNBC interview. He believes the U.S. is heading toward a fiscal disaster due to a lack of attention on rising debt. He also noted that nothing seems overvalued if a 10-year bond is valued at the current rate.
“My assumption is that we are headed into a fiscal disaster in our country. There’s nobody focusing on debt creation in the economy. My second assumption is that nothing is overvalued if a 10-year bond belongs at the current rate of 3.9%.”
Cooperman compared this to the 1972 Nifty Fifty period when government bonds were at 6.5%, and several companies which had high earnings multiples, eventually went bankrupt. He pointed out that these companies, despite their high valuations, were acquired by JP Morgan.
“In the Nifty Fifty period of 1972, the government bond went 6.5%, Avon products was 65x earnings, it has declared bankruptcy. Eastman Kodak went bankrupt with 48x earnings. IBM at 37x earnings got bankrupt. These are companies that are actively being bought by JP Morgan in the US trust.”
Cooperman emphasized that with the 10-year bond yield at 3.932%, nothing appears overvalued. He expects interest rates to remain low and anticipates a Federal Reserve rate cut in September, likely by 25 to 50 basis points. He expects that this will lead to a slow positive movement in the yield curve, with the 10-year bond yield increasing and its price declining.
Leon Cooperman also mentioned that he believes the current environment is more of a “market of stocks” rather than a unified stock market. Additionally, he expressed concern about the health insurance sector, noting that these companies are trading at low multiples, even though they have been generating excess capital and buying back their own stock. Cooperman then emphasized that he is motivated by valuation levels when assessing investments.
Leon Cooperman follows a value-focused investment strategy, concentrating on undervalued stocks and using a top-down approach to select sectors. He combines fundamental analysis with a bottom-up approach to build and manage portfolios. Omega Advisors, which handles over $3.3 billion in assets largely from Cooperman’s own wealth, has approximately $4.37 billion under management for seven clients. The firm’s Q1 2024 13F filing showed $2.4 billion in managed securities, with its top ten holdings making up 61.09% of the portfolio.
Our Methodology
In this article, we review Leon Cooperman’s latest CNBC interview and highlight ten stocks he owns and mentioned. We also provided analyst ratings, key details about each company, and the number of hedge funds investing in them.
Why focus on the stocks that hedge funds invest in? Our research shows that following the top picks of leading hedge funds can result in returns that beat the market. We use this strategy in our quarterly newsletter, where we choose 14 small-cap and large-cap stocks each quarter. Since May 2014, this approach has generated a 275% return, outperforming the benchmark by 150 percentage points. (see more details here)
A healthcare team discussing strategies for patient advocacy programs.
The Cigna Group (NYSE:CI)
Number of Hedge Fund Investors: 61
The Cigna Group (NYSE:CI) is a leading player in the global health services market, offering a wide range of health insurance products and services. Its diverse revenue streams, spanning health insurance, pharmacy services, and international operations, help spread risk and create various growth opportunities. The increasing demand for healthcare and insurance coverage supports a positive outlook for The Cigna Group (NYSE:CI)’s long-term growth.
The Cigna Group (NYSE:CI)’s focus on “services-only” commercial memberships, which are fee-based rather than risk-based, helps protect it from rising medical costs. The Cigna Group (NYSE:CI)’s Evernorth segment, which includes Healthcare Services and the specialty pharmacy Accredo, is expected to grow at a high single-digit rate shortly. According to analyst Marcel Knoop, given the stock’s low valuation and expected mid-single-digit earnings growth, The Cigna Group (NYSE:CI) appears attractive at its current price.
David Cordani, CEO of Cigna, shared the following during their latest earnings call:
“For the second quarter, I’m pleased to report that the Cigna Group delivered total revenue of $60.5 billion and adjusted earnings per share of $6.72. We achieved these positive overall results in a dynamic environment, and I’m proud of our team for continuing to focus on those we serve, ensuring that they get care of the need, to get their medications at an affordable cost and they get the support they need in order to make the best decisions about their health and vitality.
All of this requires a relentless focus on innovation, disciplined execution and a passionate commitment to our mission. During the quarter, our Evernorth Health Service businesses demonstrated continued strength with our market-leading specialty and pharmacy benefit services capabilities. Within Evernorth, I’ll start with our accelerated growth specialty and care businesses, which provides specialty drugs for the treatment of complex and rare diseases, distribution of specialty pharmaceuticals as well as clinical programs to help clients improve health and vitality. We saw strong growth in the quarter with adjusted income growing 12% year-over-year, reflecting continued demand for our services while we also continue to invest in broadening our offerings and expanding our reach.
In Accredo, our specialty business, our growth continues to be fueled by secular tailwinds as well as Accredo’s differentiated strength which makes us the market leader in the space. Biosimilars, for example, represent a force of change and a substantial opportunity for continued growth and impact. At the end of June, we began dispensing our interchangeable biosimilar for Humira. Our program has zero dollar out-of-pocket cost for patients, saving them on average $3,500 per year. To deliver these savings, we have agreements in place with multiple manufacturers that will produce biosimilars for Evernorth pharmaceutical distributor, Quallent Pharmaceuticals. Now the biosimilar opportunity goes well beyond Humira. By 2030, we expect an additional $100 million of annual specialty drug spend in the U.S. will be subject to biosimilar and generic competition.
And Accredo is well positioned to deliver differentiated value for our clients, customers and patients. In our care services businesses, we are continuing to grow and expand in key areas of increased demand, including behavioral health, virtual and home care. For example, in summer, we further expanded Evernorth behavioral care group to an additional seven states. We are seeing positive patient outcomes from our unique clinician matching capabilities based on individual needs and preferences with fully 84% of patients experiencing clinically significant reductions in the depression and anxiety symptoms. Now shifting to Express Scripts, our foundational pharmacy benefit services businesses, we are seeing continued strong client demand given our breadth of clinical and supply chain expertise as well as our proven partnership orientation.”
Overall CI ranks 5th on our list of the cheap stocks to buy. While we acknowledge the potential of CI as an investment, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.