Global Market Comments
February 24, 2021
Fiat Lux
Featured Trade:
(LONG TERM ECONOMIC EFFECTS OF THE CORONA VIRUS),
(ZM), (LOGM), (AMZN), (PYPL), (SQ), CNK), (AMC), (IMAX), (CCL), (RCL), (NCLH), (CVS), (RAD), (WMT)
Posts
The world will never be the same again.
Not only is the old world rapidly disappearing before our eyes, the new one is breaking down the front door with alarming speed. In short: the future is happening fast, very fast.
To a large extent, long-term economic trends already in place have been given a turbocharger. Quite simply, you just take out the people. Human contact of any kind will be minimized. I’ll tick off some of the more obvious changes.
All San Francisco Bay Area counties are still living under a “shelter in place” order. All schools have now been closed for a year. In March 2020 the local high school managed to get the first weekend of their annual musical “Titanic” done, but not the second.
All travel is banned except to gain essential necessities. Most bars and restaurants have been closed indefinitely, except for takeout. Some cities are issuing $1,000 fines for failure to wear a mask. The kids have turned into white, pasty zombies after staring at laptops for 12 months.
To say that we are merely fatigued from a yearlong quarantine would be a vast understatement. Climbing the walls is more like it.
As I write this, US Covid-19 deaths have topped a half million and cases have surpassed 28 million. China peaked at 4,000 deaths with four times our population. The difference was leadership issue. China welded the doors of Covid carriers shut. Here said it was a big nothing and would “magically” go away.
The magic didn’t work.
In the meantime, you better get used to your new life. You know that home office of yours you’ve been living in? It is now a permanent affair, as your employer figured out that they can make more money and earn a high stock multiple with you at home.
Besides, they didn’t like you anyway.
Many employees are never coming back, preferring to avoid horrendous commutes, lower costs, and yes, future pandemic viruses. GoToMeeting (LOGM) and Zoom (ZM) are now a permanent aspect of your life.
Commerce will change beyond all recognition. Did you do a lot of shopping on Amazon (AMZN) like I do? Now, you’re really going to pour it on.
Amazon hired a staggering 500,000 new distribution and delivery people in 2020 to handle the surge in business, the most by any organization since WWII. I can’t believe the stock is only at $3,200. It is worth double that, especially if they break up the company.
The epidemic really hammered the mall, where a fatal disease is only a sneeze away. Mall REITs are only just starting to crawl off the floor and may never again reach their old highs, no matter how much they promise to pay you in yield.
And how are you going to pay for that transaction? Guess what one of the most efficient transmitters of disease is? That would be US dollar bills. Something like 50% of all US paper money already tests positive for drugs, according to one Fed study.
Take paper money in change and you are not only getting contact from the salesclerk, but the last dozen people who handled the money. You are crazy now to take change and then not go swimming in Purell afterwards. Personally, I leave it all as a tip.
Contactless payments deal with this nicely (PYPL), (SQ), two of the top-performing stocks since April. People pay by swiping their iPhone wallet, or are simply scanned when they walk in the store, as with some Whole Foods shops owned by Amazon.
Conferences? A thing of the past. All of my public speaking events around the world have been cancelled. Webinars now rule. They offer lower conversion rates but include vastly cheaper costs as well. I can reach more viewers for $1,000 on Zoom than the Money Show could ever attract to the Las Vegas Mandalay Bay for $1 million.
At least I won’t have 18 hours of jet lag to deal with anymore. I’m sure Qantas will miss those first-class ticket purchases and I’ll miss the Champaign.
Entertainment is also morphing beyond all recognition. Streaming is now the order of the day. Disney+ (DIS) was probably the best-timed launch in business history, earning enough to cancel out most of the losses from the closure of the theme parks. Again, this has been a long time coming and the other major movie producers will soon follow suit.
Movie theaters, which have been closed for a year, may also never see their peak business again (CNK), (AMC), (IMAX). The theaters that survive will do so by only accumulating so much debt that they won’t be attractive investments for a decade.
The same is true for cruise lines (CCL), (RCL), (NCLH). But that won’t forestall dead cat bounces that are worth a double in the meantime, as they are coming off of such low levels. No vaccination, no cruise.
Exercise is changing overnight. All gyms and health clubs are now closed, so working out will become a solo exercise far away on a high mountain. I have already been doing this for 30 years, so a piece of cake here.
Friends with yoga classes are now doing them in the living room, streaming their instructors online. The economics of online yoga classes are so compelling, with hundreds attending online classes, that the old model may never come back.
If you are having trouble getting your kids to comply with social distancing requirements, have a family movie night and watch Gwyneth Paltrow and Cate Winslet die in Contagion. It has been applauded by scientists as the most accurate presentation of the kind of out-of-control pandemic which we may now be facing.
It is bone-chilling.
As for me, I have my stockpile of food and will be self-quarantining for the foreseeable future. I am at the top of five lists to get vaccinations, but so far all I have received is a ton of special offers from CVS (CVS), Rite Aid (RAD), and Walmart (WMT)
Stay healthy.
Mad Hedge Biotech & Healthcare Letter
January 7, 2021
Fiat Lux
FEATURED TRADE:
(LEFTOVER STOCKS RIPE FOR THE PICKING)
(ANTM), (UNH), (CVS), (TDOC)
One of the key things to remember in choosing companies to invest in is their long-term prospects. With these firmly in place, compounding can practically do most of the heavy lifting in the years to come.
Sure. It’s easy to be blinded by hot growth businesses these days—ones that seemingly promise unabated growth forever or those with cheap valuations but with no definitive growth prospects.
That is, you need to find businesses with not only promising prospects but are also trading at reasonable valuations. This requires a delicate balancing act.
With that balance in mind, one of the most obvious trends that fits the bill is to capitalize on the aging populations across the world.
As people age, it will drive higher demand for a myriad of healthcare services and the sector that responds most to this trend is the medical insurance segment.
Among the companies in this industry, I find Anthem (ANTM), UnitedHealth (UNH), and CVS Health (CVS) to bring the most bang for your buck.
While these companies are as fun to talk about as an actuarial table, they offer predictable cash flows and long-term prospects at reasonably priced valuations.
Let’s take Anthem for example.
From a valuation point of view, Anthem has traded hands at roughly 11.5 times its trailing earnings. More impressively, those earnings are estimated to increase by approximately 14.5% clip over the next five years.
That’s a reasonable, if not really cheap, price to pay for a company that’s well-positioned for what the future is expected to bring.
The aging population will also swell the ranks of UnitedHealth, being the largest health insurer in the country with over 14 million members in its Medicare programs.
Among the three, I find CVS the most intriguing.
The problem with this business is that people generally believe it’s only a pharmacy company. The truth is, it’s only one facet of CVS’ business, and, surprisingly, that’s its least profitable sector to date.
During the first six months of 2020, the total revenues of CVS went up 5% year over year to $132 billion.
Meanwhile, revenues of its pharmacy services sector grew by 2% compared to the same period in 2019 while its retails segment increased by 3%.
Notably, the biggest gainer is its healthcare benefits segment with a 6% jump year over year in revenues.
During these six months, CVS increased its medical memberships by 134,000 individuals to add Medicare and Medicaid insurance products.
On top of these, CVS reported that it had administered almost 2 million tests for COVID-19 in July—a number that continued to grow as the pandemic progressed throughout 2020.
Taking cue from the success of companies like Teladoc (TDOC), CVS also invested heavily in telehealth services.
In its second quarter earnings report, the company recorded a 15% increase in the number of its HealthHUB visits for regular members and Aetna cardholders.
This 2021, CVS plans to boost its digital health services by adding more segments like a behavioral support unit.
Overall, CVS has been performing better than its peers despite the pandemic thanks to its efforts on transforming itself into a more affordable healthcare benefits provider.
In fact, the company raked in $4.9 billion in profits in July 2020 alone—a whopping 48% jump from its performance in the previous year over the same period.
Most importantly, CVS is offering a dividend of $0.50 per share. Although the company hasn’t exactly raised this since 2017, it remains a preferable yield of 3.54%. This is way better than the average 1.8% payout from the S&P 500.
Despite all these, CVS is still one of the unpopular stocks among investors today.
All three companies have managed to still make a notable profit and fared relatively well despite the pandemic.
They are also underpriced, trading at roughly 14 times earnings or even less. On top of these, each pays dividends and offers an ROE of at least 11%.
Keep in mind that aging is an unstoppable and undeniable trend.
You’ve heard about the large number of Baby Boomers hitting retirement age, with the last of the roughly 72 million from that generation in the US alone turning 65 by 2030.
By 2034, older adults will outnumber children aged 18 and under. That has never happened in American history.
This isn’t a unique case in the US either.
The same is happening in Europe, where 1 of 5 people is already at least 65 years old. Asia is also expected to experience the same thing within the decade, particularly in South Korea and Singapore.
All three stocks, Anthem, UnitedHealth, and CVS offer reasonable opportunities at their current prices. They actually fit the textbook definition of value stocks. Hence, buying and holding these stocks is one of the most straightforward strategies over the next decade and beyond.
To put it simply, this only means one thing. For investors of these medical insurance stocks, time is literally on your side.
Global Market Comments
November 27, 2020
Fiat Lux
FEATURED TRADE:
(NOVEMBER 25 BIWEEKLY STRATEGY WEBINAR Q&A),
(TSLA), (CRM), (CRSP), (CVS), (SQ), (CRSP), (LUV), (GLD). (SLV), (SPY), (TMO), (UUP), (TAN), (FXA), (FXE), (FXY), (FXB), (CYB)
Below please find subscribers’ Q&A for the November 25 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley, CA with my guest and co-host Bill Davis.
Q: Is gold (GLD) still a hold?
A: Long term yes; short term no. Short term, cash is being drained out of gold in order to buy Bitcoin, just like silver. And once Bitcoin peaks, which could be today or tomorrow when it hits 20,000, then you could get a round of profit-taking and a nice little pop in gold. So, it's basically moving totally counter-cyclically to Bitcoin and the other cryptocurrencies right now.
(Note: since this webinar, Bitcoin has crashed by $3,000)
Q: A competitor of yours claims that asymptomatic transmission of COVID does not occur.
A: I would bet money that person does not have a medical degree. Asymptomatic transmission occurs in almost all diseases, so why COVID would be an exception is beyond me. I suggest that somebody is trying to sell newsletters at your expense with zero knowledge about the topic. Ask him to kiss a Covid victim. This is common in my industry where 99% of the people are crooks. This is also an example of the vast amounts of information that have been spread during an election year.
Q: Will you take a vaccine when it’s out or will you let others try it first?
A: Actually, by the time the public gets the vaccine, more than a million people will have already tried it, so I think it will be fairly safe. I am probably already the most vaccinated person on the planet; I've had flu shots every year for 40 years, so I will happily try it out. At my age, I have little to lose. And I would like to travel again, and that’s going to be a requirement for international travel. I am worried there could be long term side effects that we’ve seen with other drugs in the past, like all future children being born without arms and legs, which is what happened in the 1950s with Thalidomide.
Q: If the Senate flips to the Democrats, how do you see it affecting the market?
A: It doesn’t really affect the market overall; what it will do is affect sector reallocation. Solar, alternative energy and ESG companies do a lot better in A Democratic Senate, and energy oil companies do a lot worse. All you do is short the losers and buy the winners; it really makes no difference who wins. Most of the big conflicts over issues these days are social ones that don’t affect the market.
Q: Where do you see Tesla (TSLA) by the end of the year?
A: Well, this morning, it’s at an all-time high of $565. It looks like it wants to take a run at $600, and then we will be up 50% from where the news was announced that it was joining the S&P 500. That seems to me like a heck of a move on no real fundamental news. During this news, the market completely ignores a Model X recall and a Model Y pan from Consumer Reports. I would be inclined to take profits there or at least roll the strikes up on my options positions.
Q: What’s a good stock to play a commodity recovery?
A: You can’t do any better than Freeport-McMoRan (FCX), which I’ve been following for almost 50 years since I covered it for the Australian Financial Review newspapers.
Q: Will Salesforce (CRM) hold?
A: Yes, it’s just a matter of time before we break out to substantial new highs, and this is a stock that could double next year.
Q: What brokers do you suggest?
A: I would pick tastyworks, owned by my friend Tom Sosnoff who will be speaking at the Mad Hedge Traders & Investors Summit next week and will be answering all your questions. Click here for their site. To register for the summit, click here.
Q: Is CVS (CVS) a good buy?
A: I would say yes; a billion Covid-19 vaccine doses will need to be distributed next year. You can't do that without all the drug companies participating big time.
Q: Does Trump have a chance to win in his lawsuits?
A: It’s more likely that I will be elected the next Miss America; so, I wouldn’t place any bets on that. Some 30 consecutive Republican judges ruling against him does not augur well for his future.
Q: Would you buy any LEAPS here (Long Term Equity Participation Securities)?
A: Only in special one-off situations in the domestic stocks that haven’t moved in ten years. There are a lot of those out there now that I have been recommending. Those are all fertile territory for LEAPs, especially going out 2 years where you get the maximum bang for the buck and a 1,000% return. Don’t touch LEAPs in technology stocks here, and don’t touch Tesla in LEAPs.
Q: What’s your outlook on Southwest Air (LUV)?
A: I like it; it’s one of the healthiest domestic airlines most likely to come back.
Q: Are you going to update your long-term portfolio?
A: Yes, but I only update it twice a year and my next turn is on January 22. If you bought the last update on July 22, you made a fortune getting into Freeport McMoRan at $12 (it’s now $23), CRISPER Therapeutics at $80 (CRSP) (it’s now $110), and Square (SQ) at $110 (the current is $212). You can find it by logging into www.madhedgefundtrader.com, going to My Account, clicking on Global Trading Dispatch, on the drop-down menu, click on the Long-Term Portfolio tab and then clicking on the red tab for the Long-Term Portfolio. That lets you download an excel spreadsheet.
Q: Do you have any LEAPS to suggest now?
A: I only put out portfolios of LEAPS at giant market bottoms like we had in March. Then I put out lists and lists of LEAPS. At all-time highs, it’s not good LEAPS territory, except for specific names. So, if you want to get involved in that on a regular basis, I suggest you sign up for our Mad Hedge Concierge Service. There they are making millions of dollars a week right now.
Q: Where does the US dollar (UUP) go from here?
A: Straight down; the outlook for the buck couldn't be worse. I would be selling short the US dollar like crazy right now except that there are much better trades in US equities.
Q: Just to be clear, there’s no voter fraud?
A: There’s probably never been an election in US history without voter fraud on all sides; it’s just a question of who’s better at it. In the 1948 Texas Democratic Party runoff, back when the party owned Texas, Lyndon Johnson won by 87 votes out of 988,295 cast. It was later found that in five Hispanic-dominated counties that bordered Mexico, everyone had voted 100% for Johnson ….in alphabetical order. Johnson then took the seat with a 66% margin and went on to dominate the US Senate. I remember in the 1960 election, all the military absentee votes were sent flying around in circles over the Atlantic so Kennedy would win; that’s a story that’s been out there for a long time.
Q: You said stay away from other EVs except for Tesla?
A: A few have gone crazy this week, but that doesn’t mean they can actually make a car. So, you might get lucky on a quick trade on some of these, but long term, I don’t think any of the other non-Tesla EV companies are going to make it except for General Motors, which is plowing $27 billion into the sector. Even if (GM) may be able to put out a lot of cars, but they won’t be able to make very much money at it because they’re nowhere near the neighborhood of Tesla with the software where all the money is made.
Q: As the dollar gets weaker, will you expand your international stock picks?
A: Yes, we put out the first one in a long time, Ali Baba (BABA), on Monday, and we’ll be adding to that a bunch. I think the dollar could be weak for 5 or 10 years, a lot like it was in the 1970s.
Q: What’s your outlook for silver (SLV)?
A: Same as for gold (GLD). Quiet for the short term, double for the long term.
Q: Favorite names in biotech?
A: For that, you really need to subscribe to the biotech letter; we’re giving you two names a week there and all of them have done great. But another one might be Thermo Fisher (TMO), which seems to double every time I recommend it. It’s a great takeover target too.
Q: Is there any possibility of a 30% dip in the market (SPY) in 2021?
A: No, I don’t see more than a 10% dip in 2021. The tailwinds now are gale-force, generational, and will run for a decade.
Q: How do you sell the US dollar rally?
A: You buy all the ETFs that we cover in our foreign exchange sections. Those are the Australian dollar (FXA), the Euro (FXE), the Japanese Yen (FXY), the British pound (FXB), and the Chinese Yuan (CYB). Those are five ETFs that will do well on a weak dollar for the next several years.
Q: What about the Invesco Solar ETF TAN?
A: We have been recommending (TAN) for many years and it has done spectacularly well. I still love it long term, but it’s had one heck of a run; it’s up 300% from the March low. I think the entire country is about to have a solar explosion because the costs are now quite simply less than for oil. It’s an economic question. We are going to an all-Electric America.
Q: What do you think about LEAPS on gold?
A: It’s not really LEAPs territory yet, but on a two-year view, you’d have to do well on gold LEAPs.
Q: Is the Invesco DB US Dollar Index Bullish Fund (UUP) good to buy?
A: You should be looking to short the UUP. It’s a long dollar basket which we think will do terribly.
Good Luck and Stay Healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Although late to the party, giant biopharmaceutical company AbbVie (ABBV) is now going all-out on its coronavirus disease (COVID-19) treatment program.
The Illinois-based company, which has a market capitalization of $162.95 billion, aims to come up with a treatment that can block the SARS-CoV-2 coronavirus that causes COVID-19. The drug is currently dubbed 47D11.
AbbVie is working on this cure alongside Netherlands’ Erasmus Medical Center and Utrecht University as well as China’s bio-therapeutics developer Harbour BioMed.
It’s worth noting that AbbVie isn’t the first company to use this approach.
Earlier this year, Regeneron (REGN) announced a similar strategy to beat COVID-19. Its experimental cure, called REGN-COV2, is an antibody cocktail composed of two to three proteins working together to fight off the virus. The company plans to start clinical trials sometime this month.
Aside from AbbVie and Regeneron, Eli Lilly (LLY) is also utilizing the same technology.
In fact, the Indiana-based biotechnology leader already started dosing actual patients with COVID-19 with its experimental treatment, LY-CoV555.
Eli Lilly’s drug was actually developed using the antibodies collected from one of the first patients in the US to recover from the disease.
Using the same approach to find a COVID-19 cure isn’t the only thing Regeneron and AbbVie have in common, though.
To bulk up its oncology pipeline, AbbVie forged a partnership with Danish biotechnology company Genmab (GMAB) earlier this month.
Interestingly, Genmab is the same company behind the clinical progress of the bispecific antibody treatments of both Regeneron and Roche Holding (RHHBY).
AbbVie and Genmab agreed to collaborate on bispecific antibody development to come up with treatments that can target cancer cells and strengthen immune cells. The three drugs included in the deal are epcoritamab (DuoBody-CD3xCD20), DuoHexaBody-CD37, and DuoBody-CD3x5T4.
Aside from the three candidates already lined up, the two companies are also ironing out details on four additional cancer treatments.
The deal is estimated to be worth almost $4 billion, with AbbVie paying $750 million upfront.
On top of that, Genmab will also be entitled to get potential payments of up to $3.15 billion in milestone payments. The four potential cancer treatments could also entitle Genmab with an additional $2 billion.
Since bispecific antibodies are hailed as the “next-generation cancer therapy,” this market continues to attract big names in the industry.
So far, the list of companies working on bispecific antibodies includes Amgen (AMGN), Johnson & Johnson (JNJ), Novartis (NVS), GlaxoSmithKline (GSK), Merck (MRK), AstraZeneca (AZN), and Sanofi (SNY).
Aside from improving its oncology lineup, Abbvie has shown more creativity in diversifying its products.
Throughout the years, AbbVie had been considered as a strictly pharmaceutical company in the past. However, its recent purchase of Allergan set off a series of decisions that showcased the company’s plan to expand its portfolio.
With AbbVie’s revenue reaching $33.3 billion in 2019, several experts disagreed with the company’s decision to buy Allergan (AGN).
However, the move is estimated to add roughly $50 billion to the company’s annual revenue and help AbbVie’s bottom line.
One of the biggest products added to AbbVie’s portfolio is Botox, which has been long-regarded as Allergan’s prized cash cow.
In fact, this widely popular injectible raked in $1.02 billion in sales for Allergan in the fourth quarter of 2019 alone. Another promising product is the dermal filler Juvederm, which brought in $347.3 million in the same period.
Despite the excitement from the newly formed partnerships, a lot of investors remain apprehensive over AbbVie’s future.
These fears are rooted in the doomsday countdown for the company’s blockbuster rheumatoid arthritis drug Humira — and for good reason.
In its 2020 first quarter report, AbbVie recorded $8.6 billion in revenue, indicating a 10.1% jump year over year.
From this, Humira contributed nearly 58% despite the growing number of biosimilar rivals in Europe. In fact, Humira sales reached $4.7 billion, showing a 14.5% climb from the same period last year.
In 2019, experts predicted that Humira is poised to overtake Pfizer’s (PFE) Lipitor as the top-selling drug of all time by 2024.
AbbVie’s rheumatoid arthritis drug is estimated to reach a whopping $240 billion in sales in the next four years.
As expected, biosimilar competition, led by Amgen, has been licking their chops to get a piece of the action for years now, and they would do everything to dethrone AbbVie from its top spot in the autoimmune diseases sector.
Hence, AbbVie implemented two strategies to address this issue.
The first is forestalling the inevitable. In a recent court victory, AbbVie secured patent exclusivity for Humira until 2023.
Although this only leaves AbbVie with three short years to deal with the problem, it’s sufficient period for the company to execute its second plan: “Humira on steroids.”
Since Humira’s patent exclusivity has been a sore issue for AbbVie for years, the company decided to solve it by creating a stronger version of the drug.
The new antibody treatment, called ABBV-3373, is said to be more effective than Humira.
If all goes well in its clinical trials, then this “new Humira” can very well be AbbVie’s next megablockbuster and main moneymaker after 2023.
Humira isn’t the only big seller in AbbVie’s lineup.
Other blockbusters include cancer drug Imbruvica, which recorded $1.2 billion in revenue in the first quarter, up by 20.6% compared to the same period last year. Another cancer drug, Venclexta, is also performing well, bringing in $317 million in net revenue.
AbbVie has been boosting its next-generation treatments as well.
So far, two more Humira-like drugs stand out --severe plaque psoriasis medication Skyrizi and rheumatoid arthritis treatment Rinvoq.
Skyrizi’s annual sales are projected to grow from $1 billion to hit $4.4 billion by 2025, with the numbers going higher than $7.4 billion in the following years.
Rinvoq is expected to bring in $3.7 billion in sales by 2025 and increasing to reach $5.9 billion after that.
Right now, AbbVie appears to be oddly cheap as its shares are trading at only 9 times its expected earnings this year. This is possibly due to the anxiety over the loss of Humira’s patent exclusivity by 2023.
As AbbVie has shown in the past months, it has solid plans on how to deal with the impending loss. Its acquisition of Allergan, partnership with Genmab, and development of the “next Humira” all prove that claim.
Mad Hedge Biotech & Healthcare Letter
June 16, 2020
Fiat Lux
Featured Trade:
(THE ONE BRIGHT STAR IN THE HEALTHCARE INDUSTRY),
(ANTM), (TDOC), (CVS), (HUM), (CNC), (UNH)
The COVID-19 crisis has yanked the rug from under companies across all industries, and among the businesses that experienced a completely altered landscape these days is the health insurance industry. Imagine a business where sales increase fourfold overnight, but the customers can’t pay.
With the unemployment rate rising to historic levels since the pandemic hit, more people are dropping off commercial coverage rolls. Visits to the doctors and other elective procedures have been postponed indefinitely. Even political talks on healthcare reforms appear to be tabled until 2021.
Overnight, some doctors at country hospitals have seen workloads double and the suicide rate soar, while those in private practice are essentially unemployed.
While healthcare stocks are understandably struggling to survive, there are standouts that managed to take the blow without crumbling to ruins.
One of them is Anthem (ANTM).
With a market capitalization of $75.78 billion, Anthem is one of the biggest health insurers in the United States today.
Recently, the company wielded its power to offer $2.5 billion worth of premium credits as a form of financial assistance to its members during the pandemic.
This comes in the form of cost-share waivers, extensions for their virtual care coverage, and even assistance for struggling employers to help in maintaining the healthcare of their own employees.
While a lot of companies have been rapidly downgrading 2020 guidance due to the pandemic, Anthem updated its 2020 forecasts to reflect an increase in its adjusted net income from $19.44 per share to an eye-popping $22.30.
This indicates that Anthem has extra bandwidth for growth primarily thanks to its stable revenue stream, increasing membership, and solid earnings.
In its first quarter report for 2020, Anthem’s operating revenues jumped by 20.7% year over year to reach $29.4 billion, with profits from its IngenioRx launch.
As for its net income in the said period, Anthem raked in $1.52 billion or roughly $5.94 per share compared to $5.91 per share in 2019.
Anthem even increased its dividend by 19% in January.
However, it’s Anthem’s cash flow that continues to impress. From 2019 up until the first quarter of this year, Anthem’s cash flow surged by 58% year over year.
One of the main factors that boost the growth of a health insurance company is membership, and Anthem managed to tick off that box as well in the first quarter.
Anthem’s medical enrollment climbed to 42.1 million members, showing off a 3.2% increase year over year. With backing from government business enrollment as well as commercial and specialty businesses, this number is expected to climb higher this year.
Even Anthem’s inorganic growth ventures promise great results, with acquisitions and collaborations continuously boosting the Medicare Advantage growth of the company.
A good example is its acquisition of the Medicaid members in Missouri and Nebraska via WellCare Health at the beginning of 2020. This led to 849,000 lives added to its government business enrollment since 2019.
Meanwhile, its acquisition of AmeriBen added 452,000 members to its commercial and specialty business sector.
Anthem’s takeover of Beacon Health, which is the biggest independent behavioral health firm in the US, serves to further strengthen its position in this sector. This move added roughly 300,000 Medicaid members under Anthem’s coverage.
In terms of adapting to the needs of its members during the pandemic, Anthem is making more aggressive moves to promote its telehealth services.
Although this sector is currently widely associated with Teladoc Health (TDOC), which has a market capitalization of $12.93 billion, the rest of the league is catching up quick.
Since the average cost per telehealth session is roughly $100 less compared to fees paid in visits to the doctor’s office, this is definitely a platform-managed care providers are looking into.
According to Anthem, its telehealth app recorded over 170,000 new downloads since the COVID-19 crisis started.
It also reported a 250% surge in the demand for its virtual care services.
Anthem isn’t the only health insurer joining the telehealth fray. CVS Health (CVS), Humana (HUM), Centene (CNC), and even industry leader UnitedHealth Group (UNH) has been looking into the service.
In this period of uncertainty, choosing a stable company with a robust outlook and sold at a reasonable price is always a wise investment.
With Anthem’s profits projected to grow by roughly 47% over the next years, this company’s future offers security to its investors. Its impressive cash flow also plays a significant role in its higher share valuation.
Mad Hedge Biotech & Healthcare Letter
May 7, 2020
Fiat Lux
Featured Trade:
(HOW CVS IS BASKING IN THE CORONA SUNLIGHT)
(CVS), (UPS)
