Why Molina Healthcare Stock Cruised to a Nearly 10% Gain This Week
Key Points
This followed a crushing Friday for tech stocks and other assets seen as relatively high risk.
Molina has a fairly solid and reliable business and is relatively resistant to economic shocks.
Molina Healthcare (NYSE: MOH) had a good week, at least as far as its stock was concerned. Over the past five trading days, according to data compiled by S&P Global Market Intelligence, the shares raced almost 10% higher, thanks in no small part to a rotation into defensive stocks.
Tech aversion
Late in the week, tech stocks in particular crashed fairly hard. Many had jumped higher in recent months because of excitement around the expansion of artificial intelligence (AI). However, no rally lasts forever, and such titles began to take hits on Thursday.
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The following day, following a far better-than-expected jobs report, investors began to worry that such data increases the chances of interest rate hikes by the Federal Reserve. Higher rates (or the fear of them) tend to drive up bond yields, making such assets more attractive to investors while dampening enthusiasm for riskier plays like tech stocks.
As an insurer and managed care organization (MCO), Molina operates a solid business that is to some extent insulated from economic shocks. It also habitually posts top-line growth and net profits. So for some investors, it's a kind of safe haven in times when the economy starts to seem wobbly.
Some consider it a safe haven
I'm not as worried as some about the near future of risky plays like tech stocks. Nevertheless, Molina is a good choice for those who feel otherwise, particularly since it's a veteran operator that is very effective at both its main businesses. I'd say that makes it a buy these days.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.