According to the Undervalued-Predictable Screener, one of our Premium value screens, two health care companies with predictable earnings and trading below intrinsic value are Anthem Inc. ANTM and Amgen Inc. AMGN.
Dow receives boost following "Super Tuesday," especially in health care
On Wednesday, the day following the “Super Tuesday” voting primaries, the Dow Jones Industrial Average closed at 27,096.04, up 1,178.63 points from the previous close of 25,917.41.
The primary results sent health care stocks soaring, with UnitedHealth Group Inc. UNH and Centene Corp. CNC increasing over 9% and 14%. The SPDR Select Sector Fund – Health Care exchange-traded fund XLV increased 4.85%.
U.S. lawmakers announce funding bill to combat coronavirus
The U.S. Centers for Disease Control and Prevention reported 129 coronavirus cases within the country, including cases that are under investigation. Additionally, the casualties in the U.S. reached 11.
In response to the CDC announcement, U.S. lawmakers announced an $8.3 billion funding bill to “protect the American people from a potential [coronavirus] pandemic,” according to Senate Appropriations Committee Chairman Richard Shelby. CNBC sources further said the bill includes over $3 billion dedicated to the research and development of vaccines and therapies; $2.2 billion dedicated to the aiding in prevention, preparedness and response efforts; approximately $1 billion dedicated to medical supplies and community health centers; and $1.25 billion dedicated to the aiding of coronavirus-mitigating efforts overseas.
President Trump added that his administration is willing to “take more money” than initially planned; allowing the bill to go through and “get the funding out the door with no delay.”
Undervalued-predictable strategy continues outperforming in overvalued market
According to model portfolio statistics, the Undervalued-Predictable strategy has returned a combined 281.21% since inception, with a five-year annualized return of 6.95% outperforming the Standard & Poor’s 500 index annualized return of 6.69% for the same period.
As its name suggests, the Undervalued-Predictable strategy lists the companies that not only trade below intrinsic value based on discounted cash flow models, but also have strong and consistent revenue and earnings growth based on the GuruFocus business predictability rank. For the undervalued-predictable strategy, GuruFocus defines a predictable company as a company that has a predictability rank of four stars or higher.
Anthem
Shares of Anthem closed at $296.42, up 15.62% from the previous close of $256.38. Despite this, the stock is still trading 20.74% below its intrinsic value of $374 based on the discounted free cash flow model.
The Indianapolis-based company provides employer, individual and government-sponsored health coverage plans. According to GuruFocus, signs of strong profitability include a four-star business predictability rank and net profit margins that outperform 60% of global competitors.
Gurus with large holdings in Anthem include Andreas Halvorsen (Trades, Portfolio), First Eagle Investment (Trades, Portfolio) and the Vanguard Health Care Fund (Trades, Portfolio).
Amgen
Shares of Amgen closed at $215.11, up 5.23% from the previous close of $204.42. Despite this, the stock is still trading 16.94% below its intrinsic value of $259 based on the discounted free cash flow model.
The Thousand Oaks, California-based company manufactures drugs for the treatment of renal disease and cancer. GuruFocus ranks Amgen’s profitability 10 out of 10 on several positive investing signs, which include a 4.5-star business predictability rank, a return on assets that outperforms over 88% of global competitors and an operating margin that has increased approximately 5.30% per year on average over the past five years and is outperforming over 96% of global drug manufacturers.
PRIMECAP Management (Trades, Portfolio) has the largest stake in Amgen with 18,297,015 shares.
Disclosure: No positions.
Read more here:
- Warren Buffett’s Market Indicator Falls From All-Time High
- Top 5 Holdings of Bill Gates’ Foundation Trust
- 3 Stocks Warren Buffett and Leon Cooperman Agree On
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
