Wednesday, May 29, 2024
Stocks To Sell

3 Healthcare Stocks to Sell Before Unionization Hurts Profits

The recent strikes by Kaiser Permanente workers speak to greater structural issues that threaten weaker healthcare stocks in general. It’s clear that healthcare firms are increasingly under greater pressure to improve working conditions. That pressure magnifies issues for firms overall. Such firms can either acquiesce to union demands or face a heightened risk of further strikes.

Neither conclusion is positive for share prices. Better working conditions cost money, thus reducing profitability. Continued strikes exacerbate staffing issues that partially prompted the strikes in the first place. It’s a lose-lose situation. That isn’t to say all of the shares below are at risk of strikes. However, investors should consider offloading any of the following healthcare shares should they currently be in their portfolios due to weakness and increasing threats.

UnitedHealth Group (UNH)

Just about every piece of information suggests that UnitedHealth Group (NYSE:UNH) stock is a screaming buy at the moment. I’ve written many times suggesting it continues to make sense. The company offers strong growth, increasing earnings, a reasonable dividend and a whole host of other strong indications.

To add to that, major media outlets are currently expecting UnitedHealth Group to do well in Q3 with continued earnings growth. In other words, all signs point to a continued bright future for UNH stock. In fact, I very well may be completely wrong in recommending selling UNH stock.

However, the reason I suggest it is time to consider doing so is that UnitedHealth Group, despite its stellar business, is plagued by persistent complaints. The company’s profitability is predicated on denying claims as a business practice, after all. Those practices also manifest as other cost-cutting measures across the business. It isn’t difficult to imagine the same issues plaguing Kaiser Permanente are present across UnitedHealth Group’s business. The potential for strikes within its ranks exists. If those emerge, UNH’s earnings and profitability will take a huge hit.

Clover Health (CLOV)

Clover Health (NASDAQ:CLOV) remains among the ranks of healthcare stocks to avoid. The firm was heavily touted as a disruptive force in the healthcare insurance sector and brought to fruition through a SPAC by Chamath Palihapitiya. He made out handsomely while Clover Health’s shareholders have not.

Investors need not dive deep into the firm’s financial statements to understand why the shares have fallen from $10 to $1 since its IPO. Losses are large and persistent. Despite the firm’s promises to reduce costs for its customers, not much positive has actually materialized. Second-quarter losses approached $29 million as revenues fell from $847 million to $514 million.

Clover Health came roaring in like a lion. Its proprietary technology was supposedly the key to a novel and effective approach to improving the healthcare insurance business. It is heading out like a lamb as losses and negative adjusted EBITDA projections push it closer to $0. Investors should not chase CLOV shares at this point.

InnovAge Holding (INNV)

InnovAge Holding (NASDAQ:INNV) is a stock representing elderly healthcare for frail patients. The company runs programs, including its Program of All-Inclusive Care for the Elderly (PACE). It operates 17 centers across 5 states, covering more than 6,300 participants.

What’s ironic to me is that the four analysts covering INNV shares remain non-committal about its prospects. They all rate it a Hold with upside expected above its current price.

If I were among their ranks, I’d rate it a sell. It’s an easy assertion to make if you simply take a minute to peruse its most recent financial statements. Revenues contracted in the first half of 2023 relative to 2022. During the first half of 2022, InnovAge Holdings reported a net loss of just below $8 million. That number ballooned past $43 million during the first half of 2023. It’s difficult to find any source for optimism among those figures which is why investors should simply avoid INNV shares or sell them if any profit remains relative to purchase prices.

On the date of publication, Alex Sirois did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.

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