What companies are tomorrow's big winners? In our ongoing series, I'm chatting with Fool analysts and advisors to discover the stocks they're watching and the catalysts that would signal it's time to buy.
Today, Fool analyst Bryan White shares three companies on his watchlist that are ready to shake off the stagnancy of the health-care arena and reward patience with profits. (For your convenience, you can now create your own version at MyWatchlist.com, your free customized hub to follow the performance and Fool coverage of the companies you care about.)
Bryan's not trying to time the market exactly, but like a long lag putt in golf, he thinks he can cozy it close enough to get a gimme. There's been no momentum in the health-care industry for a while, and significant headline risk comes with the territory, but Bryan is confident the market will turn bullish within the next couple of years as the effects of health-care reform play out. He finds the bulk of the companies in the industry cheap at the moment and considers the three companies below worth buying today, but investors might need to show a little patience.
The CEO of insurance giant UnitedHealth Group
Bryan appreciates UnitedHealth's diversified revenue stream, with roughly a quarter of earnings coming from outside its core health insurance and benefits business. Most importantly, Bryan thinks UnitedHealth Group is cheap and will handsomely reward investors as it picks up a healthy share of the roughly 32 million uninsured Americans who will be insured by 2014.
Bryan expects more and more outsourcing of Medicaid to managed care organizations such as Amerigroup as states grapple with their budget woes. Additionally, with its smaller size and its focus on Medicaid, Amerigroup is a potential acquisition candidate, although it can certainly thrive on its own. Either way, it's at least worth watching.
Next year also likely could be a relatively quiet one for Medco Health Solutions
Further depressing the share price is the looming concern that UnitedHealth will bring its pharmacy benefit management in house when its contract with Medco expires in 2013. Bryan feels that risk is overblown, and it's simply providing a bigger discount for bargain shoppers who want to beat the crowds to profitable investments.
Bryan likes all three of the companies today for long-term results, even if the catalysts aren't imminent. If you're not that patient or prefer to hope for a lower price, it pays to watch. You can make smarter investing decisions with your own version of My Watchlist, new and free from the Fool. Click below to start following one of the stocks mentioned above:
Roger Friedman doesn't own shares of any companies mentioned, but they're all now on his watchlist. Amerigroup, MedcoHealth Solutions, and UnitedHealth Group are Motley Fool Stock Advisor recommendations. Motley Fool Options has recommended a diagonal call position on UnitedHealth Group, which is also a Motley Fool Inside Value pick. The Fool owns shares of UnitedHealth Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.