HQY: Political Play on Health Savings?

11/24/2016 9:00 am EST


Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

This recommendation is a true growth company with a great story; it is a leading custodian of health savings accounts (HSAs), explains Mike Cintolo, growth stock expert and editor of Cabot Top Ten Trader.

Through its various third-party relationships, HealthEquity (HQY) has 2.3 million individual members that have a total of $4.2 billion in assets.

Those figures have been growing rapidly in recent quarters. Members rose 50% from a year ago in the third quarter, while assets rose 60%.

Health savings accounts, which go along with high deductible plans, have become increasingly popular in recent years (the industry grew about 25% in the first half of the year).

Consumers are getting tax-deductible deposits (and, often, deposits from their employers) and enjoying far lower premiums. HSAs also allow for portability (if you lose your job) and investments (to build up your savings even faster).

There is competition from all the big players, but HealthEquity is growing faster than the market and, given that the industry is estimated to grow 50% by 2018 (and much more beyond that), there’s plenty of room for many providers to be successful.

The stock has surged of late on the perception that HSAs will be a centerpiece of the new administration’s health structure.

Politics or not, however, HealthEquity is a rapidly growing company that has a very bright future (analyst see earnings up 36% next year). Earnings are due out November 29.

HQY plunged from $36 to $16 during the market’s plunge in late 2015/early 2016. Then it recovered all of that lost ground over many months before another big shakeout from $39 to $30 in less than a month.

But the post-election action has all been on the upside. Expect big swings, but a small position on dips with a stop in the mid-$30s makes sense.

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By Mike Cintolo, Editor of Cabot Top Ten Trader