Jim Cramer Recently Talked About These 15 Stocks

7. Centene Corporation (NYSE:CNC)

Number of Hedge Fund Holders: 72

A caller asked for Cramer’s thoughts on Centene Corporation (NYSE:CNC), and in response, he said:

“Well, you know, like I heard today, Medicaid may be, they involve Medicaid, Medicaid could be cut back, and that’s not good for Centene, as I read it. Centene, though, sells at eight times earnings. I really think it’s a gem of a company. But then again, as you say, I am biased… But I’m going to say thumbs up to Centene at eight times earnings.”

Centene (NYSE:CNC) is a healthcare provider offering a range of services for underserved populations and commercial organizations. Its operations span Medicaid, Medicare, commercial health insurance, and various clinical and support services. River Road Asset Management stated the following regarding Centene Corporation (NYSE:CNC) in its Q4 2024 investor letter:

“The holding with the lowest contribution to active return wasCentene Corporation (NYSE:CNC) , a managed care organization (MCO) specializing in government-sponsored plans. Historically, health insurance has been a steady business that generates consistent free cash flow (CNC has produced positive FCF since 1998), and we believe CNC stands out as the prime MCO beneficiary of any future economic weakness. The company is the leading provider of Medicaid managed care plans with 17% market share, and it also owns the leading individual exchange franchise. When the economy stumbles, CNC’s revenues should increase as more individuals qualify for CNC’s plans. We are particularly encouraged by the new management’s focus on shareholder value–since the founder stepped down in Q4 2021, the company has divested seven businesses for more than $3.5B and deployed the proceeds into share repurchases.

Despite these strong long-term fundamentals, Centene’s stock declined. This was primarily due to ongoing challenges in its Medicaid business, where the medical loss ratio continued to deteriorate due to a mismatch between reimbursement rates and patient acuity following redeterminations, with Medicaid membership declining -14% even as exchange enrollment grew 22%. While management remains confident this pressure is temporary and all states have acknowledged the need to adjust rates to match patient acuity, investors remained concerned about the timing of this recovery. The stock was further pressured by broader health care sector headwinds, including potential policy risks from a Republican sweep and changes to Medicare Part D prescription drug plans. Even though the company maintained its fiscal year (FY) 2024 adjusted earnings per share (EPS) guidance of over $6.80 and executed significant share repurchases of $1.6B in Q3 and October (~4.7% of shares outstanding), the stock traded at just 9.4x forward earnings, well below its five-year average of 12x, reflecting near-term investor skepticism. We maintained the position.”