Jim Cramer came out with a healthcare maintenance stock tonight on CNBC’s MAD MONEY which he thinks will survive and perhaps thrive under the Obama healthcare plan. His pick in the healthcare maintenance sector is WellPoint Inc. (NYSE: WLP). Cramer said he has not been in support of Cigna (NYSE: CI), UnitedHealth (NYSE: UNH) and Aetna (NYSE: AET). He also said he won’t be going there.
Cramer noted that WellPoint trades at 8-times next year’s earnings, but he thinks it could trade at 10-times or 11-times earnings. That would take the stock into the $60′s. He thinks the cash even beyond buyback money is more than ample. He also thinks it has earnings upside to $6.50 EPS for next year. If this company trades at the old 13 to 14-times earnings multiple, then WellPoint could be a $100 stock.
Cramer thinks that Wall Street has clarity over the possibilities of healthcare reform under Obama. He now thinks that these won’t all be wiped out as they could have been under the Clinton plan. Cramer has been very cautious in this group up to this point because he was worried that the Obama plan could crush and destroy many of the leaders in the segment.
Shares closed up 2.3% at $48.18 and is up another 1% at $48.76 in the after-hours reaction. WellPoint’s 52-week trading range is $27.50 to $57.86.
Jon C. Ogg
June 17, 2009