< The 2014 All-America Research TeamCarl McDonaldCitiFirst-place appearances: 0

Total appearances: 4

Team debut: 2010“Managed care is a sector that has a vast amount of publicly available data, but very few analysts really delve deep into it and are able to extract actionable, insightful conclusions,” one portfolio manager declares. Carl McDonald “is one of those few,” the investor adds, “and he is able to do so regularly.” This talent helps propel the Citi researcher to his second straight No. 3 finish. In the first half of this year, McDonald notes, “the average managed care stock was up around 20 percent. By subsector, the diversified plans rose 21 percent, Medicare-focused companies were up 17 percent, and the Medicaid plans were up 24 percent.” Heading into 2015, he is cautious on the broader group. “Many of the stocks are flirting with all-time highs,” the analyst explains, “but I think there are emerging signs that the fundamental environment has become more difficult, with pricing increases lower than they were, and cost trends potentially beginning to accelerate.” One name he does view favorably, however, is Universal American Corp., a small-cap, White Plains, New York–based provider. “The fundamental view is that Universal has what I’d think of as two businesses: a very profitable Medicare HMO in the Houston area and then an unprofitable Medicare business basically everywhere else,” says McDonald. “They will be exiting the unprofitable business in 2015, so that should leave them with the profitable Houston assets, plus a lot of cash, which will likely translate into either a special dividend or share repurchase.” His price objective for Universal American’s shares is $12; in mid-September they were trading at $8.48.