Skip to Content
Stock Strategist Industry Reports

Checkup for Healthcare Moats

We downgraded these three stocks, but they’re still undervalued.

Mentioned: , ,

We have taken a fresh look at U.S. health insurers and pharmacy benefit managers UnitedHealth Group (UNH), CVS Health (CVS), and Cigna (CI). We continue to view their stocks as undervalued. However, after reviewing the competitive dynamics and ongoing debate about these players' long-term roles in the U.S. health system, we reduced our economic moat rating for UnitedHealth to narrow from wide and cut our moat trend ratings for CVS and Cigna to stable from positive. All of these companies now have narrow moats and stable moat trends.

The U.S. health system continues to put significant financial pressure on many U.S. citizens, and we think medical insurers and pharmacy benefit managers will remain key targets of regulators looking to improve the U.S. healthcare system. These organizations may continue to face significant event risk that could cut into profitability eventually. While manageable changes to the status quo appear much more likely than extreme changes like a drastic "Medicare for All" scenario that eliminates private insurance in the intermediate term, the potential for ongoing pressure on profitability in a strained U.S. healthcare system acts as a fundamental constraint to our moat and moat trend ratings in this industry.

Julie Utterback does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.