We’re booking some profits on this health insurance stock after waiting out its slump

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We’re selling 15 shares of Humana (HUM) at roughly $497 each. Following Friday’s trade, Jim Cramer’s Charitable Trust will own 85 shares of HUM, decreasing its weighting in the portfolio 1.53% to from 1.8%. Humana shares have finally clawed their way back to $500 each, recovering nearly all the losses incurred on that fateful day in June when the stock plummeted 11% in reaction to UnitedHealth comments about an uptick in people using medical insurance and strong demand for procedures like hip and knee replacements among its Medicare Advantage members. We bought into this malaise — picking up 15 Humana shares . The thinking, at the time, was that the selling looked excessive. About two weeks before those UnitedHealth remarks, Humana reiterated its full-year 2023 adjusted earnings per share outlook, and we thought the company would have had enough visibility then to detect a profit shortfall if one was coming. HUM YTD mountain Humana YTD When Humana reported second-quarter earnings in August, management confirmed our thesis, leaving its full-year adjusted EPS guidance unchanged despite the uptick in its Medical Loss Ratio. That’s because the company had enough levers to pull on the expense side to offset a near-term increase in costs. More importantly, management said its Medicare Advantage utilization trends had stabilized, assuaging investors’ worst fears over the state of the industry. We thought Humana’s update would improve the sentiment around the managed care industry and help shares return to their pre-UnitedHealth comments level of around $512. It’s taken some patience, but Humana shares finally broke through $500 in Friday afternoon trading. It’s a level we’ve said before that we would ring the register at. To be consistent with our plan, we’re trimming our position, realizing a gain of about 12%, and moving HUM back to a 2 rating . (Jim Cramer’s Charitable Trust is long HUM. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

People walk outside of the New York Stock Exchange (NYSE) on September 05, 2023 in New York City.

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