Top 5 Health Insurance Stocks to Buy

4. CVS Health Corporation (NYSE:CVS)

Number of Hedge Fund Holders: 65  

CVS Health Corporation (NYSE:CVS) provides health services in the United States. It is one of the top insurance stocks to invest in. On September 8, Aetna, a unit of CVS Health, said that it will enter an individual exchange marketplace in New Jersey with its co-branded insurance product on January 1, 2023. It will give members access to hospitals, specialists, primary care doctors, and mental health providers. 

On September 7, Evercore ISI analyst Elizabeth Anderson maintained an Outperform rating on CVS Health Corporation (NYSE:CVS) stock and raised the price target to $125 from $120, noting that the updated ratings model included accretion estimates from the Signify Health acquisition on a pro forma basis.

In its Q3 2022 investor letter, Vltava Fund, an asset management firm, highlighted a few stocks and CVS Health Corporation (NYSE:CVS) was one of them. Here is what the fund said:

“CVS Health Corporation (NYSE:CVS) is a leader in the provision of healthcare services in the USA. It has three main businesses: an enormous network of pharmacies, a health insurance company, and “prescription benefit management”, which is a kind of intermediary between insurance companies and pharmacies. This is the result of large acquisitions over the past 15 years – most notably of Caremark (2007) and Aetna (2018). The markets had deemed its acquisition of health insurer Aetna too expensive (and we agree), so CVS stock then fell into disfavour for a few years.

We took advantage of this in the summer of 2020 and brought the stock into our portfolio at a time when its price was pressed down still further by the coronavirus pandemic. CVS is a giant. It has revenues of USD 300 billion, making it one of the largest companies in the world. It is a relatively stable and highly profitable company with strong free cash flow. Over the past few years, CVS has focused primarily on reducing debt.

This is already much lower than it had been after the Aetna acquisition, and most of the cash is now likely to go to shareholders through share buybacks or be used for smaller acquisitions to grow the company further. CVS trades at about 11 times annual earnings, which is a very appealing valuation given the expected future growth in profitability and overall modest cyclicality in its business.”