Core Insights - Cityblock Health and Meridian Health Plan of Illinois have partnered to provide comprehensive, community-based care to 10,000 Medicaid beneficiaries across 17 counties in Illinois [1][2] Group 1: Partnership Overview - Meridian is a leading managed care organization in Illinois and a subsidiary of Centene Corporation [2] - Cityblock Health focuses on value-based healthcare for Medicaid and dually eligible beneficiaries and has been operating in Illinois since 2024 [2] - This partnership marks the fourth regional collaboration between Centene and Cityblock, following previous partnerships in New York, Ohio, and Florida [2] Group 2: Care Model and Services - The partnership aims to enhance clinical and care coordination for Medicaid members by integrating Meridian's primary care services with Cityblock's wrap-around care services [3] - Cityblock's wrap-around model includes 24/7 access to primary and urgent care, behavioral health, social care, clinical pharmacy, care management, and support services [3] - The care model leverages multidisciplinary clinical expertise, advanced technology, and data insights to improve care quality and member experience [4] Group 3: Market Context and Need - Nearly one in four residents in Illinois are enrolled in Medicaid, highlighting the need for improved access to quality care for this population [4] - Cityblock Health serves over 100,000 members and collaborates with various Medicaid health plans and health systems across more than ten states [6]

Fund Performance - Artisan Mid Cap Value Fund's Investor Class fund ARTQX returned 0.97%, Advisor Class fund APDQX posted a return of 0.98%, and Institutional Class fund APHQX returned 0.97% in Q3 2025, compared to a 6.18% return for the Russell Midcap Value Index [1] Market Context - Equity markets continued to rally in Q3 2025 as investors overlooked tariff concerns, driven by strong corporate earnings, rising AI capital expenditures, and hopes for economic support from US fiscal policy and lower interest rates [1] Centene Corporation Overview - Centene Corporation (NYSE:CNC) is a healthcare enterprise that provides services to under-insured and uninsured families and commercial organizations, with a one-month return of 10.30% and a 52-week loss of 33.35% [2] - As of January 2, 2026, Centene's stock closed at $41.78 per share, with a market capitalization of $20.536 billion [2] Performance Analysis of Centene Corporation - The portfolio's stock selection was broadly negative across sectors in Q3 2025, with the healthcare sector being a significant source of underperformance, particularly due to Centene Corporation, Align Technology, and Baxter International [3] - Centene's shares declined after the company withdrew its 2025 guidance due to higher-than-expected market acuity on the ACA marketplaces and elevated Medicaid cost trends, compounded by a declining trend in Medicaid enrollment [3] - The end of the pandemic-era policy prohibiting disenrollment from Medicaid has led to millions losing coverage, and new work requirements from the Big Beautiful Bill (BBB) set to take effect on January 1, 2027, are expected to create additional headwinds for Medicaid enrollment [3] - Although Centene can reprice risk annually, the multitude of challenges it faces, including changes from the BBB, will likely delay recovery, prompting the fund to exit its position in Centene [3]

Core Insights - Baupost Group's latest 13F filing reveals a highly selective and concentrated portfolio, focusing on durable businesses with long-term cash generation potential [1][2] Investment Moves - **Restaurant Brands International (QSR)**: Increased by 4,203,300 shares to 8,252,862 shares, representing a $529.3 million position (11.05% of the portfolio). This is now Baupost's largest equity holding, indicating a belief in significant mispricing relative to its stable franchise model and cash flows [3][4] - **Elevance Health (ELV)**: Increased by 703,000 shares to 1,319,000 shares, totaling a $426.2 million position (8.90%). The increase suggests confidence in the company's predictable cash flows and resilience in a politically noisy sector [5][6] - **Union Pacific (UNP)**: Newly established position with 1,496,204 shares, valued at $353.7 million (7.38%). The railroad's high barriers to entry and pricing power align with Baupost's focus on downside protection [7][8] - **Alphabet (GOOG)**: Reduced by 775,850 shares to 1,858,138 shares, now a $452.6 million position (9.45%). The reduction reflects portfolio risk management rather than a loss of conviction [9] - **CRH plc (CRH)**: Trimmed by 442,000 shares to 3,383,395 shares, valued at $405.7 million (8.47%). The trim indicates a disciplined approach to valuation, despite the long-term thesis remaining intact [10] - **Full Exits**: Baupost exited several positions entirely, including Viasat, Liberty Broadband, ICON plc, and Amcor, signaling a shift in risk-reward balance [11][12] Strategic Focus - The quarter was characterized by conviction-driven capital redeployment into high-confidence ideas, particularly in sectors like restaurants, railroads, healthcare, and materials [13][14] - Trimming positions like GOOG and CRH reflects a focus on risk management and valuation discipline rather than a bearish outlook [15] - The top 10 positions account for over 75% of disclosed assets, emphasizing Baupost's belief in concentration as a strategy against ignorance [16] - The portfolio prioritizes downside protection, with upside driven by business durability rather than macroeconomic bets [17]

Core Viewpoint - Molina Healthcare (MOH) is considered a potential takeover target by investor Michael Burry, which could positively impact its stock in 2026 [1][3]. Group 1: Stock Performance - Molina Healthcare shares closed higher on December 30, but are down approximately 50% from their year-to-date high [2]. - The stock has recently surpassed its 100-day moving average, indicating sustained bullish momentum into 2026 [4]. Group 2: Takeover Implications - Being a takeover target could validate Molina Healthcare's disciplined operations and profitability in Medicaid, which Burry described as "rare" [3]. - A larger parent company could provide scale, capital, and diversification, significantly reducing perceived risks associated with margin pressures in managed care [4]. Group 3: Future Growth Potential - Even without a takeover, Molina Healthcare shares are well-positioned to increase in value, as the company is expected to generate profits in Medicaid while competitors may incur losses [5]. - The company's decision to focus on core managed-care operations and halt unprofitable ventures reflects a commitment to sustainably improve its bottom line [6]. - Molina Healthcare's current valuation at approximately 0.22x sales is significantly more attractive compared to larger peers, although it does not currently pay a dividend [6]. Group 4: Analyst Sentiment - Wall Street analysts maintain a consensus rating of "Hold" for Molina Healthcare, with price targets reaching as high as $200, suggesting an upside potential of 18% [7].

Core Viewpoint - Investor Michael Burry has identified Molina Healthcare (NYSE: MOH) as a potential takeover target by 2026, drawing parallels to Warren Buffett's investment strategies [1] Company Summary - Molina Healthcare operates in the managed care sector, which is characterized by its focus on providing health insurance services [1] - The company is currently under scrutiny for its market position and potential for acquisition, indicating a shift in investor interest towards its future prospects [1] Industry Summary - The managed care industry is experiencing increased attention from investors, particularly regarding potential mergers and acquisitions [1] - The mention of Molina Healthcare as a takeover target suggests a trend where established investors are looking for undervalued companies within the healthcare sector [1]

Core Insights - U.S. managed healthcare insurers are undergoing significant transformation due to rising medical costs, increased regulatory scrutiny, and a surge in investments in data and value-based care [1] - Scale, diversification, and disciplined capital allocation are crucial for payers to protect margins and sustain long-term growth [1] - UnitedHealth Group (UNH) and Elevance Health, Inc. (ELV) are two major players in the health insurance and managed care sector [1] UnitedHealth Group (UNH) - UNH, with a market cap of nearly $298 billion, is the largest health insurer in the U.S. and operates beyond traditional insurance through its Optum healthcare services unit [4] - The company serves 50.1 million people as of September 30, 2025, reflecting a 1.6% year-over-year growth [5] - Total revenues increased by 11.6% year-over-year in the first nine months of 2025, with UnitedHealthcare growing by 15% and Optum by 6.6% [6] - UNH is divesting assets, including a $1 billion sale of its South American operation, Banmedica, to streamline operations and address regulatory challenges [7] - The company ended Q3 2025 with $30.6 billion in cash and short-term investments, with a total debt-to-capital ratio of 41.6% [8] - Rising medical costs have pressured profit margins, with the medical care ratio increasing to 88.1% in Q3 2025 from 84.9% the previous year [10] Elevance Health, Inc. (ELV) - ELV, with a market cap of $77.4 billion, is a diversified managed care organization focusing on growth and operational efficiency [11] - The Carelon division, which integrates care delivery and data analytics, saw operating revenues rise by 35.4% year-over-year [12] - Total revenues for ELV increased by 13.9% year-over-year in the first nine months of 2025, supported by strong growth in premiums and product revenues [13] - Strategic acquisitions have strengthened ELV's portfolio, while divesting underperforming segments allows for resource reallocation [14] - Total expenses rose by 15% year-over-year in the first nine months of 2025, with the benefit expense ratio deteriorating to 88.9% [15] Comparative Analysis - Both UNH and ELV face unfavorable earnings estimates for 2025 due to rising costs, with UNH expected to see a 41.1% decline in EPS while ELV anticipates a 9.2% decline [16] - Valuation analysis shows ELV is more attractive, trading at a forward P/E of 12.68X compared to UNH's 18.69X [17] - In the past three months, UNH shares declined by 4.8% due to concerns over medical costs and investigations, while ELV shares increased by 7.8% [19] Conclusion - Both companies are navigating a challenging managed care environment with rising medical costs and regulatory pressures [22] - UNH has significant scale and the Optum platform but faces short-term margin pressures [22] - ELV appears to be in a stronger position with strategic market exits and a growing Carelon platform, offering a better near-term risk-reward profile [23]

Core Viewpoint - Humana Inc. (HUM) is at a critical juncture as rising medical costs and Medicare Advantage (MA) challenges have impacted investor sentiment, raising the question of whether the worst is already priced in [1] Performance Summary - Over the past year, HUM shares have increased by 1.8%, outperforming the broader industry which saw a decline of 28.3%, and also faring better than peers like UnitedHealth Group (UNH) and Centene Corporation (CNC), which fell by 35% and 32.6% respectively [2][8] - Despite ongoing volatility, the relative strength of HUM suggests that investors are not ready to abandon the stock [2] Near-Term Pressures - Humana is experiencing pressure from elevated medical costs, particularly in its Medicare Advantage segment, with higher utilization trends and inpatient admissions affecting its medical care ratio [6][8] - Regulatory uncertainty regarding MA reimbursement rates continues to be a concern, limiting potential upside in the near term [6] Long-Term Tailwinds - Humana's long-term investment case is supported by its scale, the aging U.S. population, and initiatives focused on value-based care [9] - The company remains a leading Medicare Advantage provider with strong brand recognition and an integrated care delivery platform [9] Valuation Insights - Humana's current forward 12-month P/E ratio is 21.26X, which is above its five-year median of 17.69X and the industry average of 15.63X [10] - The stock is priced below the average analyst target of $284.87, indicating a potential upside of about 10% [11] Earnings Estimates - The Zacks Consensus Estimate for HUM's 2025 EPS is $17.08, reflecting a year-over-year growth of 5.4%, while revenues are expected to increase by 10% to $128.94 billion [12] Conclusion - Humana lacks a clear catalyst for immediate recovery, but the stock's recent sell-off may have already accounted for much of the operational and regulatory risks [13] - For current investors, maintaining positions may be the most rational strategy, while new investors are advised to monitor cost trends and reimbursement clarity before entering [14]

Summary of Healthcare Services Conference Call Industry Overview - The conference call focused on the **Healthcare Services** industry, particularly the **Managed Care** sector and its outlook for 2026, highlighting potential margin improvements and policy clarity as positive factors for growth [4][10][11]. Key Points and Arguments Managed Care - **Earnings Recovery**: Most Managed Care Organizations (MCOs) are expected to reach trough earnings in 2026, with potential upward revisions thereafter. Medicare Advantage (MA) is anticipated to drive margin upside, while skepticism remains around Medicaid and ACA Exchanges until MCOs demonstrate margin improvements [5][12]. - **Enrollment Trends**: MCOs are targeting enrollment declines to improve margins, with companies like CVS, ELV, and UNH focusing on this strategy. Conversely, HUM is positioned for membership growth [12][52]. - **Regulatory Environment**: The 2026 midterms are expected to create gridlock, reducing the likelihood of major policy changes outside of CMS rulemaking, which could stabilize the operating environment for MCOs [5][12]. Pharmaceutical Distributors - **Strong Fundamentals**: The current strength in results for pharmaceutical distributors is attributed to stable generic pricing, MSO growth, and a robust specialty pipeline. Companies like McKesson (MCK) and Cencora (COR) are favored due to their strong specialty businesses [9][16]. - **M&A Activity**: Distributors led M&A activity in 2025, with expectations for continued integration and organic investment in MSO capabilities in 2026 [25]. Labs and Healthcare Facilities - **Demand Trends**: Labs are expected to see steady demand trends with a healthy backdrop in diagnostics. Regulatory uncertainties may impact pricing and mix development, but overall operating conditions are stable [9][12]. - **Facility Performance**: Healthcare facilities are positioned to benefit from favorable utilization trends, although policy uncertainty remains a concern for future earnings growth [12][16]. Additional Insights - **Investment Picks**: Top investment picks include UnitedHealth (UNH) and CVS Health (CVS) for their cleaner stories, while Cigna (CI) is seen as attractive but with more complexities [5][14][17]. - **Margin Pressures**: Medicaid remains a challenge, with companies like ELV and UNH guiding for margin pressure in 2026. Investment income is also expected to be a headwind for managed care [5][12]. - **Market Dynamics**: The ACA Exchanges are viewed as a swing factor for MCOs, with a wide range of outcomes expected due to potential shifts in market morbidity [12][43]. Conclusion The healthcare services industry is navigating a complex landscape with potential for margin recovery and growth driven by Medicare Advantage, while facing challenges in Medicaid and ACA Exchanges. The focus on regulatory clarity and strategic M&A activity will be crucial for companies as they prepare for 2026 and beyond.

Core Insights - Sunshine Health, a subsidiary of Centene Corporation, is partnering with elite female athletes to promote health and well-being in Florida [1][4] - The first collaboration features Dana Mathewson, a Paralympian and cancer advocate, emphasizing the importance of health awareness and prevention [2][3] - The partnership aims to support Florida's Medicaid program by focusing on mental health, child and maternal health, and community wellness [3][4] Company Overview - Sunshine Health is one of the largest healthcare plans in Florida, offering managed care through Medicaid, Long Term Care, and Medicare Advantage [6] - The organization operates 10 Community Connections Centers across Florida, providing local support and resources to enhance community health [4][6] - Sunshine Health's specialty plans cater to various needs, including mental illness, HIV/AIDS, and children with special healthcare requirements [6]

Industry Overview - The healthcare sector is entering 2025 with challenges, particularly for managed care stocks like HMOs, due to high medical utilization, tighter reimbursement assumptions, and uncertainty around government-sponsored plans [1][3] - However, the industry is showing signs of recovery, with improved cost trends, better rate visibility, and insurers regaining control over margins as they adapt post-pandemic [2][8] Recent Developments - Higher-than-expected medical utilization has been a significant issue for HMOs, leading to recalibrated pricing and guidance from insurers [3] - Regulatory uncertainties regarding Medicare Advantage reimbursement have kept valuation multiples low, causing investors to remain cautious [3] Company Performance - UnitedHealth Group (UNH), Elevance Health (ELV), and Centene Corporation (CNC) faced sell-offs due to worsening medical-cost trends, while CVS Health (CVS) saw gains after delivering strong results and raising guidance [4][7] - UNH benefits from scale and integration with Optum, allowing it to normalize margins after earlier pressures [7][14] - CVS has improved cost controls and is leveraging its retail and pharmacy operations to enhance efficiency, positioning itself for growth in 2026 [15][16] Future Outlook - The sector is expected to become more investable as pricing discipline returns, scale advantages are reasserted, and demographic trends support steady demand [9][10][11] - The Zacks Consensus Estimate for UNH's 2026 earnings is $17.60 per share, reflecting an 8% growth from 2025 [15] - CVS's 2026 earnings estimate is $7.14 per share, indicating a 7.5% increase from 2025 [16] - Centene's 2026 earnings estimate is $2.94 per share, showing a significant 46.6% surge from 2025 [19]