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Two Values in Healthcare

12/07/2016 8:00 am EST


Mark Skousen

Editor, Forecasts & Strategies, High-Income Alert

Big changes are expected in healthcare under Trump, asserts growth and income expert Mark Skousen. Here, the editor of Forecasts & Strategies looks at two opportunities in the health arena.

One change expected under the Trump presidency is the increasing use of health savings accounts and UnitedHealth Group (UNH), the country’s largest medical insurer, may benefit.

In its most recent quarter, UNH posted better than expected revenues and earnings. It helped to drop out of most state exchanges and save over a billion dollars.

UNH currently is selling for 18 times future earnings and sports a price-to-sales ratio below one. Both metrics are considered a value play in the health care sector.

The stock price rallied sharply last month, and is now ahead by 30%. Zacks Investment Service now considers UnitedHealth a “top value stock pick.”

Omega Healthcare Investors (OHI), the assisted living REIT, did not participate in the rally and, in fact, declined along with most interest-sensitive REITs.

However, with a healthy and sustainable dividend yield of nearly 9%, I see Omega as a bargain opportunity, especially for income seekers. The company has raised its dividend 17 times in a row, and may do so again.

Last month, Omega Healthcare barely missed Wall Street expectations when it reported funds from operations of $170 million, or 83 cents a share.

Wall Street analysts expected 84 cents per share. But Omega’s management is upbeat about the future, and expects funds from operations to increase in the next quarter to 85-86 cents per share.

Some analysts strongly believe that Omega Healthcare is grossly oversold, and so does CEO C. Taylor Pickett, who last month bought 21,800 shares of OHI at or above the current price.  Here’s your chance to buy at an even better price.

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