Major HMO Stocks Fall Amid Downgrade
Health-care providers also got a dose of bad medicine from Wall Street on Monday.
Prudential Securities Inc. analyst David Shove cut his rating on Humana (HUM) shares to “hold” from “strong buy” with a 12-month target price of $15. Humana lost $2.63 to $11.94, leading the Morgan Stanley HMO index to a 6.5% loss.
Shove also cut his ratings to “hold” from “strong buy” for WellPoint Health Networks (WLP), Cigna (CI) and UnitedHealth Group (UNH), saying those shares also have risen to their full value. WellPoint fell $8 to $107.69, Cigna fell $2.20 to $126.07 and UnitedHealth fell 44 cents to $115.
Health-care stocks have been one of the few areas of good news during the market’s autumn slump. Even with Monday’s losses, the HMO index is up 87% year-to-date.
Shove said in a research report Monday that Humana shares, which have risen 46% this year, are “fully valued.” He also said investors are ignoring legal risks Humana faces in lawsuits that allege the company and other HMOs improperly limited medical care and rewarded doctors for cutting costs.
Among the other health-care providers that faltered Monday: Coventry Health Care (CVTY), down $2.13 to $19.25; Trigon Healthcare (TGH), off $5.94 to $71.88; and Oxford Health Plans (OXHP), down $2.13 to $37.94.
