Diamond Hill Capital Management, LLC - Mid Cap Strategy on Humana Inc.
Thesis
Diamond Hill established Humana as a new holding during the quarter. Humana is the second-largest Medicare Advantage insurer in the US, and its shares benefited from strong first-quarter results. Better-than-expected Medicare rate increases announced in April should help the industry close the gap between pricing and underlying cost trends. The position also fits the manager's broader view that health care offers attractive valuations and favorable long-term demand drivers after several years of relative underperformance.
“better-than-expected Medicare rate increases in early April, which will be helpful for the industry in closing the gap between pricing and cost trends.”
Key risks
- The gap between Medicare pricing and medical cost trends may take time to close.