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Will UnitedHealth Stock Witness Volatility til the Elections?

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Share of UnitedHealth Group Inc. (UNH - Free Report) , the largest health insurer in the United States, witnessed its worst sell off since Aug 8, 2011, on the outcome of Bernie Sanders winning the Nevada caucus.

The latest development increases Sanders’ chances of becoming the Democratic Party’s nominee. This, in turn, can go against UnitedHealth because of Sander’s proposal of Medicare for All healthcare plan.

The proposal seeks to eliminate private health insurance and replace it with a universal Medicare plan on premise that the same would reduce administrative inefficiencies and control costs in the health-care system.

All the major players are against the proposal, since it would replace the current private insurance plans and eat into the earnings of the health insurers.

UnitedHealth Group earlier said that the “Medicare for All” would “surely jeopardize the relationship people have with their doctors, destabilize the nation’s health system and limit the ability of clinicians to practice medicine at their best.”

UnitedHealth, one of the largest players in the Medicare Advantage (MA) market,  has been expanding in this line of business, given the very attractive market size of $860 billion of U.S. Medicare spending projected for 2020. With nearly 10,000 baby boomers aging daily into medicare, this business provides scope for significant expansion. For 2020, the company expects revenues from Medicare in the range of $92.5 billion to $93.5 billion and membership growth of nearly 700,000 more people in 2020.

The company holds number one spot with more than 25% of MA market share. Humana Inc. (HUM - Free Report) remains at the second position and CVS Health, (which gained exposure to the MA market with its acquisition of Aetna last year) holds the third spot. Anthem Inc. (ANTM - Free Report) and Centene Corp. (CNC - Free Report) follow at lower ranks.

Shares of UnitedHealth Group fell 7.7% while that of Centene decreased 9.7%. Other insurers like Humana declined 6.1%, while Anthem shed 5%.
We expect this volatility in the healthcare sector to continue til the presidential election.

In a  year's time the stock has gained 4.98% compared with the industry's rise of 1.2%.

 

UnitedHealth carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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