I’m Buying This Health Care Stock as Traders Eye Tech Exit

After the miserable action last week, it wasn’t surprising that we had some bounce action on Monday morning. The stocks that were the weakest on Friday led early, and the stocks that were the strongest were down. But the bounce is already slipping. Breadth was only around 52% positive early on, and it is now down to about 43%.

That answers part of the big question. Some of the folks trapped in semiconductors, data centers and other technology names are already looking for exits into strength. These names are seeing some defense, and there is a lot of talk about how cheap they are on forward estimates, but now there’s technical overhead and questions about the future.

Looking for New Leaders

I’m not rushing to buy anything, but I’m looking more closely for groups that may become leaders as the technology and AI names undergo a period of sharper evaluation. We saw some minor rotation last week, but not enough to produce any new leaders yet.

I’m optimistic the biotechnology sector will eventually benefit from rotation, and I like other medical names as well. I’ve been reviewing sector lists to find names with strong growth and reasonable valuations. One name that caught my eye is Oscar Health (OSCR).

Oscar Health

Oscar sells health insurance to people who buy coverage on their own through the Affordable Care Act exchanges. Nearly all of its customers receive a government subsidy, so the stock tends to move on related headlines out of Washington. The stock is up more than 100% this year, and after hitting a new 52-week high on Oct. 13. It could offer attractive entry points as it pulls back toward support.

The expanded insurance subsidies from the pandemic years expired at the end of 2025, and the individual insurance market shrank by double digits. Despite that headwind, Oscar grew membership about 46% over the past 12 months, while its medical loss ratio (the share of premiums paid out in claims) fell to 79% in the June quarter from 91% a year earlier. The company priced its plans for profit rather than market share, and as competitors faded, Oscar gained new business. The first half of 2026 was the most profitable in its history, and management has raised full-year earnings guidance twice since February.

The Georgia Pullback

The stock pulled back last week after Georgia regulators approved 2027 rates. Oscar’s average increase of nearly 29% was the largest of the eight insurers in the state, which the market read as a company about to price itself out of growth. That fits management’s stated approach of letting the market shrink rather than chasing members at a loss, and one state’s filing doesn’t change the story.

Wall Street is lukewarm, with an average rating of hold and a price target of about $36, ranging from $27 to $49. Barclays and Piper Sandler are at $49 and $48, respectively. Oscar trades at around 14 times next year’s expected earnings.

It’s also worth noting that the second half of the year is guided to a loss, which is how the business tends to work. Members use up their deductibles as the year goes on, so costs rise into December and profit is front-loaded. That said, while the consensus for the fourth quarter is a loss, each time the company has raised guidance, that implied loss has gotten smaller.

The Chart

Technically, the pullback has brought Oscar to just above its 50-day moving average, which also lines up with the level it broke out from in early October.

The $30 area, where the stock traded when it reported second-quarter earnings, is the next support level below that. Open enrollment for 2027 starts Nov. 1, and the third-quarter report comes Nov. 5, so we’ll learn whether membership is holding. As long as the 50-day holds, we’ll look to build a position incrementally for clients at Hammerhead Financial, and we’d treat a break of the $30 area before the report as a sign we’re wrong.

I’m working hard to find new ideas, but it will take a while for new leadership to develop.

At the time of publication, DePorre was long OSCR.