Artisan Partners, an investment management company, released its “Artisan Select Equity Fund” second-quarter 2025 investor letter. A copy of the letter can be downloaded here. The fund’s Investor Class ARTNX, Advisor Class APDNX, and Institutional Class APHNX returned 6.77%, 6.76%, and 6.80%, respectively, in the second quarter, compared to a 10.94% return for the S&P 500 Index. In addition, you can check the top 5 holdings of the strategy to know its best picks in 2025.
In its second-quarter 2025 investor letter, Artisan Select Equity Fund highlighted stocks such as Elevance Health, Inc. (NYSE:ELV). Elevance Health, Inc. (NYSE:ELV) is a health benefits company. The one-month return of Elevance Health, Inc. (NYSE:ELV) was -0.01%, and its shares lost 38.73% of their value over the last 52 weeks. On September 29, 2025, Elevance Health, Inc. (NYSE:ELV) stock closed at $318.61 per share, with a market capitalization of $71.744 billion.
Artisan Select Equity Fund stated the following regarding Elevance Health, Inc. (NYSE:ELV) in its second quarter 2025 investor letter:
“Elevance Health, Inc. (NYSE:ELV) has had a tough few quarters, and it hasn’t gotten much better so far in Q3 of this year. Elevance’s share price came under pressure starting in September of last year. We believe its Medicaid business is to blame—we had estimated it to be ~15%ofnormalized profits, but it dropped to 5% of profits last year. An unprecedented amount of upheaval has hit Medicaid over the past few years. During COVID-19, the government suspended reverification—the process of verifying program eligibility. Over the course of three years without reverification, national Medicaid membership swelled 32% to a peak of 95 million enrollees in early 2023. As COVID-19 wound down, reverification resumed, which caused a 17% decline in the number of enrollees. This type of enrollment volatility is extreme and unusual. Many of those who churned off the program were healthy and, therefore, high margin, while those that remained were less healthy and used more care, generating higher costs. This squeezed Elevance’s Medicaid margins to levels well below normal. It is important to understand, however, that each state sponsors its own Medicaid program and is required to pay providers (e.g., Elevance) premiums that reflect the costs of ensuring beneficiaries. Those premium rates are currently being renegotiated higher on a state-by-state basis, and we expect the margin gap to narrow as we move through 2025 and 2026. We view Medicaid margin normalization as inevitable.
A more recent development compounded investors’ concerns about Elevance. After the close of Q2, another provider, Centene, issued a large profit warning related to its Affordable Care Act (ACA) marketplace business. We do not have full clarity as Centene has not yet reported full results, but it appears this warning is related to an unusual change in the ACA member base. During the Biden administration, new laws (first the American Rescue Plan Act, followed by the Inflation Reduction Act) expanded and enhanced marketplace subsidies. This included fully subsidized plans with $0 premiums for people in certain income brackets. The appeal of these new zero premium plans was particularly high in states that have tighter Medicaid eligibility standards, such as Texas and Florida. Perversely, in those states, a resident can earn income too high to qualify for Medicaid and too low to be eligible for ACA marketplace plans. This seems to have resulted in brokers and enrollees overstating income to qualify for zero-premium health insurance, which drove rapid enrollment growth. The Centers for Medicare & Medicaid Services (CMS) has begun to crack down on brokers and income verification, which has resulted in declining ACA marketplace enrollment, particularly in this subsegment. Similar to the dynamics in Medicaid, the disenrolled marketplace members seem to have been higher margin, which has resulted in lower margins for the remaining business…” (Click here to read the full text)
Elevance Health, Inc. (NYSE:ELV) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 67 hedge fund portfolios held Elevance Health, Inc. (NYSE:ELV) at the end of the second quarter, which was 75 in the previous quarter. In Q2 2025, Elevance Health, Inc. (NYSE:ELV) reported $49.4 billion of operating revenue, an increase of 14% year-over-year. While we acknowledge the risk and potential of Elevance Health, Inc. (NYSE:ELV) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than Elevance Health, Inc. (NYSE:ELV) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Elevance Health, Inc. (NYSE:ELV) and shared the list of best inexpensive stocks to buy according to hedge funds. In addition, please check out our hedge fund investor letters Q2 2025 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
