Every election produces winners and losers, and they are not limited to candidates. Certain stocks may also go higher or lower based on the election results.
What happens when the election results are as chaotic as they did in 2020? Some stocks win even amid – or even because – uncertainty. Here are three stocks that soared after Election Day.
Three great motivations, a common denominator
Shares of Cigar (NYSE: CI) up almost 15% on Wednesday following the US election on Tuesday. anthem (NYSE: ANTM) and UnitedHealth Group (NYSE: UNH) don’t fall too far behind, with increases of 12% and 10%, respectively.
You can see a clear common denominator for these three things: They are all major health insurers. It is certainly no coincidence that health insurance stocks skyrocketed when election results appear.
At the time of writing, the Democrats appear to be in a strong position to retain control of the US House of Representatives, while the Republicans seem to be on track to hold a majority in the Senate. The winner of the presidential race is still uncertain.
However, former vice president Joe Biden claimed to be the lead in the popular vote and in the Electoral College. He also appeared to be the leader in votes in enough battlefield states to win the Electoral College, given that he held the lead after all the votes were counted.
Why is this scenario good news for health insurers? For one thing, a divided government reduces the likelihood of big changes that could have a negative impact on health insurers. Also, assuming Biden continues and eventually wins the presidential race, he will likely pursue his Obamacare consolidation agenda. That could provide a unique opportunity for health insurers to have significant Medicaid activity.
Do they buy it now?
Some votes are still being counted. There is always the possibility that the end result might differ from the present. But if the two major political parties divide control of the US Congress and the Biden win, would Anthem, Cigna and the UnitedHealth Group be a good choice to buy?
I think the outlook will be favorable for the health insurance industry. However, instead of focusing on three insurance-focused healthcare stocks, I think a better move would be to pick the strongest company in the industry and buy its stock. In my opinion, that company is UnitedHealth Group.
UnitedHealth Group is by far the largest health insurer; Its $ 289 billion market cap is four times larger than that of Anthem and Cigna, respectively. It also generates significantly more revenue and profits than either of its two smaller competitors.
I think being the biggest gives UnitedHealth Group certain advantages. In particular, the size of the company offers some economies that increase with size. However, the main reason I think it’s the best stock in the group isn’t the health insurance business. Instead, it’s the company’s Optum segment.
Optum is comprised of three different businesses: OptumHealth, OptumInsight and OptumRx. OptumHealth provides care, including behavioral health and chronic illness management. OptumInsight provides healthcare technology services. OptumRx provides pharmacy benefit management services.
In the 3rd quarter of 2020, Optum generated more operating revenue than UnitedHealth Group’s health insurance business while generating only 70% of the revenue from its health insurance business. Optum also stands out as the biggest growth engine for the company.
I also fully expect that UnitedHealth Group will increase its focus on the telehealth market in the near future. There has been speculation that the company might acquire a remote service provider I’m fine. Even if that didn’t happen, UnitedHealth Group CEO Dan Wichmann hinted at the possibility of the company moving into a more robust telehealth sector during the company’s Q3 conference call.
I think UnitedHealth Group is a good stock to buy now as election results can indicate stability for health insurers. However, I think that the company’s outlook will be solid even if the results change.