The Misfits: Molina Healthcare (MOH)

St. Roch heals the pestiferous, Il Tintoretto, oil on canvas, 1559 (Church of St. Roch)

Medicare and Medicaid have been front of mind for many Americans lately, and not just investors. With news trickling out about a new administration tackling healthcare spending in America, a fair share of people are covering the challenges facing these government programs and how to root out fraud and unnecessary costs.

Healthcare is one of the industries many generalist investors tend to get wrong. They often gravitate toward stalwart dividend payers (that underperform the market) or biotech startup lottery tickets. This is unfortunate because the sausage makers in this industry—medical supplies, contract research organizations, generic drug manufacturers, and assessing patients for government-sponsored healthcare—is a fertile field of fantastic investments.

Another industry with a long track record of success is health insurance companies. Whether commercial insurance providers or managed care organizations, many of them have been stellar investments over the past twenty years.

Since government-sponsored healthcare is a hot topic, let’s focus on one provider that works exclusively in this sector: Molina Healthcare (NYSE: MOH).

Getting to this level of outperformance hasn’t been a given. In fact, Molina’s outperformance over the years can be attributed mainly to a controversial decision to remove the founding family and install new leadership.

Let’s dig into what makes Molina tick, the pivotal decision that made it the successful investment it is today, and what investors might come to expect from the volatile and politically-charged industry of providing services to Medicare and Medcaid.

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