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A Policy-Induced Risk Pool Shift Impacted Centene (CNC) in Q3

By Soumya Eswaran | October 13, 2025, 8:21 AM

Heartland Advisors, an investment management company, released its “Heartland Mid Cap Value Fund” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. The portfolio increased 1.63% in the quarter, lagging behind the Russell Midcap® Value Index’s 6.18% gain. Stock selection was the primary contributor to the underperformance. The market witnessed the trends from Q2 accelerate, with optimism about the AI boom and rising electricity demand pushing large- and mid-cap growth stocks to new highs regardless of business model quality or valuation. Thus, the third quarter is a period when focusing on valuations can be detrimental. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2025.

In its third-quarter 2025 investor letter, Heartland Mid Cap Value Fund highlighted stocks such as Centene Corporation (NYSE:CNC). Centene Corporation (NYSE:CNC) is a healthcare enterprise that offers services to under-insured and uninsured families and commercial organizations. The one-month return of Centene Corporation (NYSE:CNC) was 9.56%, and its shares lost 50.95% of their value over the last 52 weeks. On October 10, 2025, Centene Corporation (NYSE:CNC) stock closed at $35.76 per share, with a market capitalization of $17.563 billion.

Heartland Mid Cap Value Fund stated the following regarding Centene Corporation (NYSE:CNC) in its third quarter 2025 investor letter:

"Health Care.  Our worst performing holding in the quarter was Centene Corporation (NYSE:CNC). Shares of the managed care company suffered from a policy-induced risk pool shift in the ACA Healthcare Exchanges that negatively impacted profit margins and caused a pre-announced earnings cut, nearly a month ahead of the scheduled earnings release date. Frankly, we were evaluating a position size reduction given the policy changes but were surprised by the announcement timing.  Recognizing the short-tailed nature of the liabilities (allowing faster adjustments than other forms of insurance), we waited for management to formally articulate their plans to address the issue in late July. We came away encouraged by aggressive pricing actions meant to reflect recent developments and restore margins.  In September, the company provided a positive update on the action plan that helped shares begin to recover from July’s sharp selloff. Meanwhile, political pressure has intensified from both sides of the aisle to address the looming health insurance affordability crisis.  Any policy improvement would further supplement the actions taken by CNC, which assume no relief. The stock trades at 11x 2026 earnings estimates which look increasingly beatable based on the recent update."

Centene (CNC) Falls 11.1% on Investor Caution Ahead of Q2

Centene Corporation (NYSE:CNC) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 59 hedge fund portfolios held Centene Corporation (NYSE:CNC) at the end of the second quarter, compared to 64 in the previous quarter.  While we acknowledge the potential of Centene Corporation (NYSE:CNC) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Centene Corporation (NYSE:CNC) and shared Oakmark Fund's views on the company. In addition, please check out our hedge fund investor letters Q3 2025 page for more investor letters from hedge funds and other leading investors.

READ NEXT: The Best and Worst Dow Stocks for the Next 12 Months and 10 Unstoppable Stocks That Could Double Your Money.

Disclosure: None. This article is originally published at Insider Monkey.

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