Rising one rung to third place is Citi’s Carl McDonald. The analyst “is very thorough in his research and provides a lot of quantitative detail behind his analyses,” one booster affirms. “Coming into the year,” McDonald recalls, “I was very positive on the group, with buy ratings on every managed care plan I cover, mainly because I thought the market’s sentiment toward health care reform would improve.” He has of late become less optimistic, however, downgrading several stocks after they delivered strong performance. (The sector advanced 26.8 percent this year through August, against the S&P 500’s 14.5 percent rise.) “Investors generally agree that health care reform won’t be so bad next year, improving sentiment toward the group,” he explains. “There’s still no sign [the] medical cost trend is picking up, which should drive additional earnings upside over the second half — but that’s what everyone thinks, so I don’t think the earnings-per-share upside will have as much impact on the stock prices.” McDonald’s top large-cap name is Hartford, Connecticut–based health insurer Aetna, which “will have the fastest earnings growth among the large-cap plans by a significant margin over the next couple of years,” he contends, “and yet it is trading at the lowest valuation multiple in the group.” — Leslie Kramer |
Aetna Leslie Kramer Connecticut Carl McDonald
