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Sydnee Gatewood
Sydnee Gatewood
Articles (3134) 

FPA Capital Comments on Centene

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November 06, 2020 | About:
Centene Corporation (NYSE:CNC):

CNC was the Fund's 2nd worst performer for the quarter. The company is a managed care organization (discussed in more detail in prior commentaries). The stock declined on election uncertainty and on the increased likelihood that the Supreme Court might strike down the Affordable Care Act due to the death of Supreme Court Justice Ginsburg. CNC does have the headline risk, but the stock is trading at 10x 2021 price to earnings multiple versus its long term historical average of 16x.6 Its COVID-19 costs appear to be in line with expectations and the worst long term effect from a repeal of the Affordable Care Act is estimated to be a 10% hit to earnings.7 We believe that any likely political scenarios would not cause a major long-term disruption to the company while its valuation appears to price in a much more dire scenario.

From the FPA Capital Fund (Trades, Portfolio)'s third-quarter 2020 shareholder letter.

About the author:

Sydnee Gatewood
I am the editorial director at GuruFocus. I have a BA in journalism and a MA in mass communications from Texas Tech University. I have lived in Texas most of my life, but also have roots in New Mexico and Colorado. Follow me on Twitter! @gurusydneerg

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