Episode summary
Dylan Jovine | Healthcare Stocks Crash, While AI Chips Boom: What the Market Is Telling Us
Summary
Health insurers were hammered after the Trump administration proposed keeping Medicare Advantage rates essentially flat for 2027, and Dylan Jovine framed UnitedHealth as the clearest example of the selloff. He said UnitedHealth fell about 20% on the week, while Humana, CVS Health, Elevance Health, and Centene also dropped sharply, even though the company’s reported business results were still roughly in line and revenue rose from $100 billion to $113 billion. His view was that this is not a sell signal, but a longer turnaround in a stock he personally owns and that the firm still recommends.
Jovine argued that the market is mispricing UnitedHealth’s long-term value and said the stock could be worth about double where it trades now. He linked the rate pressure to a push for more efficiency, including greater use of AI, and said the downside for Medicare Advantage customers could become politically difficult. The central message was that investors who wait for stocks to feel safe usually miss the bargain.
On the other side of the market, he pointed to ASML as proof that AI infrastructure remains strong. He described ASML as the only maker of extreme ultraviolet lithography machines, said its gross margin was 54%, and noted that its business remains strong even without China sales. He highlighted that the stock had already doubled after a prior recommendation, reinforcing his view that the semiconductor supply chain is still producing major winners.
Key takeaways
- Jovine said UnitedHealth’s drop after Medicare Advantage rate pressure was a buying opportunity, not a reason to sell.
- He argued UnitedHealth could be worth roughly double its current price, but only over a longer turnaround.
- He said flatter Medicare Advantage rates will pressure insurers to use AI and other efficiency tools.
- Jovine described ASML as the only producer of extreme ultraviolet lithography machines and cited a 54% gross margin as evidence of its dominance.
- He said ASML’s earnings showed strength even without China growth, after the stock had already roughly doubled from a prior recommendation.
Notable quotes
“this is definitely not time to sell. That's how I see this. This is going to be a longer turnaround”
“If you don't buy stocks when they look absolutely terrible, you're never ever going to buy a bargain in life”
“the dominant dominant super dominant company. But what the Trump administration is really doing by capping rates, a 0.09% increase, a flat basically”
“Basically they are the only producer in the world of extreme ultraviolet lithography machines which is technology that is so advanced”
“That tells you that they don't have a lot of competition up there. If they had lots of competition, that would be a lower margin, basically”
How the episode opens
Good morning. This is Dylan Jven with Behind the Markets. Happy Thursday.
Today's Thursday, January 29th. I'm grateful to be here with you guys. I actually took Ben Franklin's advice.
Early to bed, early to rise keeps a man healthy, wealthy, and wise to heart. I got up at 4:30 this morning, been in the office since 5:30, 5:40 thereabouts, and just been looking at quarterly earnings that are coming in. And the big news this week so far has been, there's two sides to it.
On the health insurance side, one of our recommendations, United Health, plunged 20% this week on Tuesday, basically after the Trump administration proposed keeping Medicare advantage rates flat for 2027. That has actually hammered these companies. And really what it sent was Humanana dropped more than 20%.
CVS Health dropped 13%. United Health Group lost more than 19%. Elevance Health tumbled 13% while Centine dropped more than 10%.
And this came on a day that United Health posted kind of inline earnings and revenue. Revenue went from 100 to 113 billion, 13% increase. That's great.
Earnings, a bunch of one-time charges, but would have been about 5.65.7 six5.7 billion dollars but excluding those onetime charges. So the business is looking okay but United Health has a big Medicare Advantage business and the bigger your Medicare Advantage business the harder your stock got hit and United Healthcare got hit very hard and we recommend the stock right around 300 bucks a share and it's at 280 and this is something I own personally just in the interest of full disclosure. Look this is one of those things a lot of folks say is it time to buy is it time to sell what should I do?
First of all, this is definitely not time to sell.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- healthcare stocks selloff
- medicare advantage rate pressure
- health insurance earnings
- ai chip demand
- euv lithography
Companies and tickers mentioned
- UNH
- HUM
- CVS
- ELV
- CNC
- ASML
- UnitedHealth Group
- Humana
- CVS Health
- Elevance Health
- Centene
- ASML
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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