Humana (HUM): a Medicare play, and more

Posted Oct 25th 2007 5:57PM by Joseph Lazzaro

As noted, given the current choppy/consolidating market conditions, adding a few defensive plays is a prudent strategy. Humana Inc. (NYSE: HUM) is an insurer worth an evaluation.

Humana's Medicare and Medicare prescription business, 50-state presence, likely substantial membership growth, and cost controls make it an "insurance company of significance." Another major positive: the currently underserved Medicare population, and an expanding Medicare demographic, the latter courtesy of the U.S. baby boom generation's retirement. HUM closed Thursday up $3.43 to $76.93.

The qualifiers? Competition on HUM's commercial business side is a hurdle, but overall, the risk/return for this stock is favorable.

[Note: Technical analysis agnostics stop reading here; all others continue.]

Technically, Humana's chart looks strong. The stock did straddle its 50-day moving average this summer, but has since remained solidly above it, while also clearing $65-$68 resistance. With a new 52-week high recently in place and a P/E of 21, HUM is not cheap, but it's a reasonable price to pay for this safety-and-growth hybrid.

Stock Analysis: Humana is a low-risk stock. Investors with an investment horizon longer than 1 year should be rewarded from HUM's shares. A preferred entry price if one were to buy would be below $75, if the market presents that opportunity. Sell / Stop Loss: $47.

Tags: drugs, health care, Humana, insurance, Medicare, retirement, senior citizens

Reader Comments (Page 1 of 1)

10-25-2007 @ 11:26PM

Bill said...

Humana is a racket. Thye cancelled my medical insurance and used the reason "you don't live in the state where your home office is domiciled. I contacted the state insurance commissioner and was assured they had to make me an offer to convert my policy to a private policy. I contacted Humana and requested a quote for a conversion to a private policy. They refused to give it to me in writing but made the following offer over the phone: $2300 per month premium, $1,000 deductible with a lifetime benefit of $10,000. I was a diabetic and they were looking for a way out and found it. I assured them that just because Mississippi was part of my address did not mean i was a complete fool. I knew and they knew what they were doing.....they covered themselves.

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