Shortly after the opening bell Wednesday, we’ll be buying 15 shares of Humana (HUM), at roughly $473 apiece. Following the trade, Jim Cramer’s Charitable Trust will own 100 shares of HUM, increasing its weighting in the portfolio to 1.83%, from 1.56%. Humana and several other managed-care providers are nose-diving in premarket trading Wednesday. The sell-off comes after the largest player in the space, UnitedHealth Group (UNH), warned Tuesday of higher costs due to elevated elective procedures among seniors. At a conference, the company’s management noted outpatient care has strengthened since its first-quarter earnings release , especially among a cohort of older Americans, as a result of strong demand for procedures like hip-and-knee replacements. The news is confirmation of our positive view on pent-up demand around elective medical procedures, benefitting medical-device companies like Club holdings Johnson & Johnson (JNJ) and GE Healthcare Technologies (GEHC). But the managed-care stocks are getting hit because the increase in activity could pressure medical loss ratios (MLR), ultimately impacting earnings. UnitedHealth Group said Tuesday it expects its second-quarter MLR to be near the top of, or above, its full-year guidance range of 82.1% to 83.1%. Due to its leading Medicare Advantage exposure, Wednesday’s market moves imply Humana could be most at risk from increased outpatient activity among seniors. Medicare Advantage represents roughly three-fourths of Humana’s total revenues. But Humana stock’s 7% slide Wednesday morning on comments by rival UNH — which did not adjust its earnings guidance — looks too excessive and, therefore, offers a buying opportunity. Most notably, Humana on June 1 reiterated its full year 2023 adjusted earnings-per-share outlook of at least $28.25, which compares to Wall Street’s consensus of $28.32 a share — indicating any visiblity the insurer has on an uptick in outpatient procedures is unlikely to weigh heavily on profitability. (Jim Cramer’s Charitable Trust is long HUM, GEHC, JNJ. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
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