Centene (CNC, Financial) was a new investment for the Oakmark Global Select Fund in Q1 2024. The company is a major player in government-sponsored health programs, including Medicaid, Marketplace, and Medicare Advantage. Despite some challenges in its Medicare Advantage segment, Centene's strong market position and growth potential in other areas make it an attractive investment at its current valuation.
"Centene is a large health insurer specializing in three major government-sponsored programs: Medicaid, Marketplace and Medicare Advantage. Each of these programs benefits from long-term secular tailwinds. In Medicaid, states are steadily outsourcing their programs to managed care companies like Centene to help reduce costs and improve care quality. Managed Medicaid penetration has increased meaningfully over the past two decades, and we expect further gains over time. In Marketplace, growth is driven by the trend toward more individuals buying health insurance. Centene holds the top market share in both of these programs and is well-positioned to capitalize on their continued growth. Finally, in Centene’s Medicare Advantage business, past missteps will result in losses next year, but we believe Centene can turn its Medicare Advantage segment around and generate positive earnings in the next few years. Centene currently trades for about 9x our estimate of normal earnings power, which we believe is a compelling value for a business that generates healthy returns on capital and is capable of growing EPS at a low double-digit rate." — David Herro (Trades, Portfolio), Oakmark Global Select Fund, Q1 2024 Fund Letter
Read full letter at gurufocus David Herro's Oakmark Global Select Fund 1st-Quarter Commentary 2024 Q1 page.
