Analysis: UNH CVS DHR GE PANW

It has been a generally down day in the U.S. equity markets, but the major averages have bounced nicely off their session lows. The markets are tasked with digesting a flurry of political news this morning, including President Trump's summit meeting with North Korea and testimony from U.S. Trade Representative Robert Lighthizer, Fed Chairman Jerome Powell, and former Trump lawyer Michael Cohen on different topics.

The health insurance stocks are taking a hit today, likely on the news that Democratic Representative Pramila Jayapal is introducing a new "Medicare for All" bill. The bill aims to create a universal Medicare program within a two-year window that also eliminates competition from private health insurers, hence the selloff. Currently, the bill does not contain plans on how it will be funded.

On the topic, analysts at Barclays published a note today that said: "The view of many investors (including our own view), as well as some industry consultants and political experts, is that the private insurance system is so embedded in today's healthcare system that a few envision a scenario where private insurers are boxed out of the American health care equation as proposed by Sanders and Jayapal." Later, the analysts added that "we view negative stock reactions as buying opportunities for MCO investors through the 2020 election cycle."

We acknowledge how this headline will bring volatility to the group and it is a development worth monitoring, however we're not sellers on this news. Instead, we're more inclined to buy off the weakness and would with UnitedHealth Group (UNH) if our average cost basis wasn't already so low. And as we said in today's Rundown, the next level we are looking to buy CVS Health (CVS) is $59, but we are currently restricted from trading it because the stock was mentioned on Monday's episode of Mad Money.

Political views aside, when evaluating these stocks and their policy risk, it is imperative to remember how the missions of UnitedHealth Group and CVS Health are to bring down costs of the consumer, a goal that everyone can agree on at the end of the day. Although the reputation of CVS Health management has recently taken a hit because of last week's poor guidance, providing better health at lower costs was a core tenet of their Aetna acquisition. Integration risks are still apparent, but the end goal of the combination and the expected benefits to the consumer are the same.

UnitedHealth Group also has a resilient history against uncertain economic/political times. As evidence, we refer to the comments made by UnitedHealth Group CEO David Wichmann on the company's earnings call in January, when he dutifully articulated the durable nature of the company's business model:

"So one thing that's true through these political shifts and economic shifts is that health care products are always in demand. So whether it's an economic expansion or a recession or whether there's a liberal or conservative administration, UnitedHealth Group's positioning tends to be unique and very well regarded. We manage a portfolio of diverse health care businesses and they serve large and diverse end markets, and we tend to grow regardless of economic cycle or administration. We have a unique portfolio of competencies and data technology as well as clinical insights. And actually, our ability to manage clinical interactions just continues to advance across this business, which is reinforcing that capability in our business. And our aligned services have been never been positioned to produce greater value for society, for clients, consumers.... is a very scaled and proven model that has a deep management team... It's largely, 95% domestic, so we really don't have tariff, Brexit or other global concerns. And it has a long runway for growth. It has 5 well-defined, high-performing growth pillars that are going meet an $11 trillion global market in 2025... we believe that whether it's political sentiment or economic sentiment, this UnitedHealth Group will continue to provide distinctive results and returns, both for society as well as our shareholders."

Lastly, we reiterate our plan to book profits in Danaher (DHR) off its recent strengths (shares are up almost 12% since the announcement of the (GE) BioPharma acquisition when our restrictions are cleared. Just like how we a locked in a gain with our Palo Alto Networks (PANW) trim earlier, the trading discipline we always educate and preach states: Bulls make money, Bears make money, Pigs get slaughtered. For more information on our trading restrictions, please see here.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long UNH, CVS, DHR, PANW.