UnitedHealth Stock Is Falling After a Downgrade. Anthem Is Better-Positioned, Analyst Says By Josh Nathan-Kazis Oct. 10, 2019 9:11 am ET Order Reprints Print Article Text size Photograph by Andrew Harrer/Bloomberg Health-insurance stocks have had a rough few months, with theS&P 500 Managed Health Care subindustry groupdown 19% since February, a period in which the broaderS&P 500was up 8%. Now,JefferiesanalystDavid Windleyis dampening any expectations for a turnaround. In a note out Thursday morning, Windley downgraded managed-care giantUnitedHealth Group(ticker: UNH) to Hold from Buy, and cut price targets for six other stocks, includingAnthem(ANTM),Cigna(CI), andHumana(HUM). “MCO sentiment turned abruptly negative a year ago and has stubbornly remained there,” Windley wrote. “The primary poison in the punch bowl, political risk, won’t likely abate for at least another 9 months.” Windley said that, while Medicare for All and other political risks to the sector represent unlikely occurrences, they will remain in the headlines. “When policy stabilizes, [managed-care organization] valuations should expand,” he wrote. EDITOR'S CHOICE UnitedHealth Group didn’t immediately respond to a request for comment on the downgrade. The back story.Political headwinds have slowed managed-care companies to varying degrees this year. UnitedHealth Group is down 10.9% in 2019, Cigna is down 21.2%, and Humana is down 11.4%, while the S&P 500 is up 16.5% over the same period. In recent weeks, UnitedHealth shares, and the shares of others in the sector, havefallen as the political fortunes of Democratic presidential hopeful Elizabeth Warren have risen. What’s new.In his lengthy Thursday morning report, Windley wrote that he was downgrading UnitedHealth Group to Hold because of competition from Anthem. “ANTM’s strategy to regain share in its Commercial Group Risk book is showing traction,” he wrote. Windley said he expected the company’s market share in that category to continue to grow, “likely at UNH’s expense.” Windley wrote that “other MCOs are better long options than UNH when overhangs are removed and the group starts to work again,” in particular citing Cigna as a “Best Idea.” Still, he cut his price target on the Buy-rated Cigna to $203, from $233. The stock closed Wednesday at $149.59. Windley cut his price target on the Buy-rated Anthem, which closed at $238.35 on Wednesday, to $299, from $365. Referring to possible Medicare for All legislation, Windley wrote: “The biggest problem by far is investors’ inability to dismiss a policy outcome that is, or seems to closely resemble, a ‘nuclear option’ for managed care companies.” Looking forward.UnitedHealth Group shares were down 1.2% in premarket trading on Thursday. Windley said the political overhang on the stocks could lift at three possible moments over the next two years. He recommended buying managed-care stocks if Joe Biden wins the Democratic nomination in July 2020, and to wait if he doesn’t. If President Trump wins the November 2020 presidential election, Windley says to buy the managed-care stocks, but to wait if he loses. And if Warren is inaugurated in January 2021, buy managed-care stocks at the end of 2021 if she goes after the industry early in her term, otherwise, wait. Write toJosh Nathan-Kazis atjosh.nathan-kazis@barrons.com https://www.barrons.com/articles/ma...et-uncercut-prices-store-rollouts-51570725076