4 Health Care Stocks Prescribed As Buys By Goldman Sachs

The 2018 health care landscape will be defined by a U.S. corporate tax cut and payer efforts to reduce costs, according to Goldman Sachs.

By the firm's estimates, managed care organizations are particularly positioned to profit in this environment. 

The Rating

Goldman Sachs analyst Stephen Tanal initiated coverage on UnitedHealth Group Inc UNH, Centene Corp CNC, Humana Inc HUM and WellCare Health Plans, Inc. WCG with Buy ratings.

The Thesis

With an opportunity to penetrate Medicare and Medicaid; the proliferation of high-deductible plans; and the fueling of Medicare Advantage by an aging population, Goldman Sachs considers the managed care sector poised to seize meaningful upside.

“We view managed care as a structurally advantaged sector uniquely well-positioned to help public and private sector payors control healthcare costs, a value proposition poised to gain ground,” Tanal said in a note. (See the analyst's track record here.) 

“Several structural and cyclical tailwinds like value-based reimbursement, the ‘consumerization’ of healthcare plus a goldilocks cyclical backdrop argue for owning the group.”

The health care sector's circumstances are further compounded by low and declining unemployment, which is expected to boost commercial enrollment; stable inflation supporting revenue growth; and rising rates bolstering investment income.

Price Action

At the time of publication, Centene was trading down 1.91 percent, UnitedHealth was up 0.73 percent and Humana was up 2.54 percent. WellCare Health Plans was trading up 1.63 percent. 

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