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Zacks Investment Ideas feature highlights: Humana

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For Immediate Release

Chicago, IL – July 13, 2022 – Today, Zacks Investment Ideas feature highlights Humana Inc. (HUM - Free Report) .

INVESTMENT IDEAS #1

This Healthcare Giant Is Breaking Out to New All-Time Highs

While no one knows for sure if the low in June marked a true bottom, the formation of a market bottom typically starts with accumulation in certain industry groups and sectors. These leaders normally begin their rallies before the major indices. The industries with a substantial number of stocks breaking out to new highs will most often represent the best profit opportunities, and it is this approach that leads us to the health care giant that is surging to new highs.

The company a stock keeps can help us determine which industry groups are poised for market-beating returns. The majority of past stock market winners were in top industry groups before they went on major runs. How can we identify which industries are leading the market?

Fortunately for investors, our Zacks Industry Rank makes the process simple. Zacks classifies all stocks into one of approximately 250 industry groups based on the Zacks Rank of the individual stocks. The average Zacks Rank is calculated for every industry group each trading day.

We put the Zacks Industry Rank to the test and compared how the top half (industries with the best average Zacks Rank) and the bottom half (industries with the worst average Zacks Rank) fared against the S&P 500. This study was conducted over the ten-year period from 2008-2017.

Over this timeframe, using a one-week rebalance, the top half beat the bottom half by a factor of more than 2 to 1. Clearly, investing in stocks contained within the top industry groups can give investors a leg up on the market.

The Zacks Medical – HMO industry is ranked in the top 27% out of approximately 250 industries. Digging a bit deeper, this group has returned 3.19% this year while the S&P 500 is off about -19%. Quantitative research studies have shown that approximately half of a stock's future price appreciation is due to its industry grouping.

By investing in stocks within the best groups, we can provide a constant 'tailwind' to our investing success. Let's take a look at a well-known health benefits company within this leading industry.

Humana Inc.

Humana is a health benefit and well-being company in the United States. HUM provides medical and supplemental benefits to individuals through Health Maintenance Organization (HMO), Private Fee-For-Service (PFFS), and Preferred Provider Organization (PPO) plans. The company also has contracts with various states to provide Medicaid and long-term support services. Additionally, HUM provides commercially insured medical, dental, vision, and administrative services to employers and the military. Humana was founded in 1961 and is headquartered in Louisville, KY.

Humana has built a considerable membership base, with over 17 million members under its medical plans and over 7 million members in its specialty product category. In the first quarter of this year, revenues from Medicaid and other businesses rose 31.8% from the same quarter in the prior year. In total for 2022, revenues are projected to increase 12.08% to $93.09 billion. Earnings are expected to climb 19.43% to $24.65 per share. The long-term trends illustrated below are what the bulls like to see.

HUM has strung together an impressive track record in terms of earnings beats, having exceeded estimates in each quarter for the past five years running. The health provider most recently announced Q1 EPS back in April of $8.04/share, a 17.72% surprise over the $6.83/share consensus estimate. HUM has delivered a trailing four-quarter average earnings surprise of 5.94%.

The stock is up better than 5% this year while the market hovers in bear market territory. Make sure to keep an eye on HUM as the outperformance looks set to continue.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.


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