You’ll get no argument from me that under such a scenario Anthem will lose considerable value. But I will argue that a.) Anthem and other health insurers play a vital, misunderstood role in the current system b.) the probability is remote that this role will be vitiated by socialized insurance in the short- to medium-term and c.) Anthem has attributes unique among its managed-care peers that make it especially attractive.Īs to the probability of the Doomsday Scenario, three things need to happen at once for it to transpire. When one big customer-the government-sets rates and deals with the parties involved, there is little use for such intermediaries. Should the United States of America adopt a single-payer health-insurance system, Anthem will definitely turn out to be a bad investment.Īnthem and the other “Big 5” health insurers-UnitedHealth Group, Aetna, Cigna and Humana-are middlemen that connect the complicated ecosystem of healthcare providers, consumers and payors. Let’s address Anthem’s Doomsday Scenario straightaway. Caught up in the political rhetoric of the 2020 election, Anthem is an above-average business selling for a below-average price- below-average, as in cheap. Such is the case right now with Anthem, one of the nation’s leading health insurers, which I own for my clients and have been adding to recently. Localized cancer, headline risk-call it what you will, these episodes create wrinkles in the investment time-space continuum that long-term investors can use to arbitrage between perception and reality. Charlie Munger, always one for a colorful image, says that he and his partner, Warren Buffett, love investing in businesses that have “localized cancer”-not systemic or terminal, in other words, but transient and therefore easily dealt with. Often, the negative headlines misrepresent a company’s issues, either by grossly exaggerating them or by ascribing permanence to a problem that’s merely passing. In a column about Alphabet this past summer, I discussed the concept of “headline risk,” a shorthand term investors use to capture the state of play when a stock isn’t performing well because of a drumbeat of bad news.
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