Jim Cramer on Humana Inc. (HUM): ‘If You Can’t Price The Product, Get Out Of The Business’
AInvestFriday, Oct 4, 2024 5:06 pm ET
1min read
HUM --
Jim Cramer, the renowned investor and host of CNBC's Mad Money, recently shared his thoughts on Humana Inc. (HUM) and its recent financial developments. In a series of tweets and interviews, Cramer expressed his concerns about the company's earnings outlook and medical cost ratio, ultimately leading him to sell his entire position in the company.

Humana Inc. (HUM), a for-profit health insurance company, recently lowered its earnings outlook for the full year 2023. The company cited higher-than-expected medical costs as the primary reason for the revision. This news did not sit well with Cramer, who had previously held a bullish stance on the company. In a recent interview, Cramer stated, "If you can't price the product, get out of the business. That's what Humana is doing, and it's not a good sign."


Cramer's decision to sell his entire position in Humana was not solely based on the earnings outlook. The company's medical cost ratio also played a significant role in his decision. Humana now expects its medical cost ratio to print at 91.4% in its current financial quarter, well above its previous guidance for 89.5%. This increase in medical costs, coupled with the lowered earnings outlook, led Cramer to question the company's growth prospects and ultimately sell his shares.


In addition to the financial developments, the failed merger between Humana and Cigna also contributed to Cramer's decision to sell. In December 2023, Cigna Group abandoned its plans to merge with Humana Inc. This merger would have created a significant player in the health insurance industry, but its collapse raised concerns about the company's strategic direction and future prospects.

Cramer's initial investment thesis for Humana Inc. (HUM) focused on the company's strong performance in the Medicare Advantage market. However, the recent financial developments and the failed merger led Cramer to reevaluate his position. He ultimately concluded that the company's growth prospects no longer aligned with his investment strategy and risk tolerance.

In conclusion, Jim Cramer's decision to sell his entire position in Humana Inc. (HUM) was driven by the company's revised earnings outlook, increased medical cost ratio, and the failed merger with Cigna. Cramer's investment strategy and risk tolerance played a crucial role in his decision to exit the position. As the market's consensus rating on Humana stock remains "overweight," investors should continue to monitor the company's financial performance and strategic direction.
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