Benjamin Graham's Value Screening Identifies Top Healthcare Performers in Today's Market

In the tradition of Benjamin Graham’s time-tested deep value approach, a comprehensive analysis of healthcare sector stocks reveals which companies align with this legendary investor’s stringent fundamental criteria. The screening methodology focuses on identifying firms with attractive price-to-book and price-to-earnings multiples, minimal leverage, and demonstrated long-term earnings expansion — hallmarks of Graham’s disciplined approach to equity selection.

The Leading Healthcare Value Candidate

Molina Healthcare Inc (MOH) emerges as the strongest candidate under Graham’s framework, earning an 86% confidence rating. This mid-cap enterprise operates within the managed healthcare services arena, primarily through government-sponsored programs including Medicaid and Medicare, supplemented by marketplace exchange offerings. The company orchestrates healthcare delivery via an extensive network of independent practitioners, medical facilities, and pharmaceutical partners.

Molina’s performance across Graham’s evaluation criteria is notably robust, with particular strength in sector fundamentals, sales momentum, debt management, and valuation metrics. The stock demonstrates solid long-term earnings trajectories and exhibits reasonable pricing relative to book value. Interestingly, the company shows a weakness in one area: current liquidity ratios fall slightly below optimal thresholds, though this represents a minor concern relative to its overall financial positioning.

Secondary Healthcare Value Opportunities

Three healthcare stocks score 71% under this Benjamin Graham methodology, warranting consideration for value-oriented portfolios:

ResMed Inc (RMD) represents a large-cap position in medical device manufacturing and cloud-based health software. The firm specializes in respiratory management solutions, sleep disorder diagnostics, and out-of-hospital care platforms. While ResMed demonstrates strong fundamentals across sales, sector dynamics, and debt ratios, valuation metrics present headwinds — both price-to-earnings and price-to-book ratios appear elevated relative to Graham’s thresholds.

West Pharmaceutical Services Inc (WST) operates as a global manufacturer of advanced delivery and containment systems for injectable pharmaceuticals. The company bifurcates operations between proprietary product development and contract manufacturing services. Similar to ResMed, West meets most Graham criteria but faces valuation pressure that limits its appeal under strict value parameters.

Centene Corp (CNC) functions as a fully integrated healthcare services provider targeting government-sponsored and commercial insurance segments. The enterprise segments operations across Medicaid, Medicare, Commercial, and Other categories, serving both low-income and underinsured populations. While Centene passes tests on sector characteristics, sales momentum, earnings growth, and valuation, it exhibits structural challenges in current liquidity and leverage positioning.

The Speculative Medical Innovation Play

Intuitive Surgical Inc (ISRG) scores 71% despite representing a higher-growth, capital-intensive medical robotics manufacturer. The company develops da Vinci surgical systems and Ion endoluminal platforms for minimally invasive procedures. Though Intuitive passes Graham’s fundamental tests admirably, its elevated valuation multiples — particularly price-to-earnings and price-to-book — place it outside the strict deep value framework that characterizes Graham’s original approach.

Understanding the Graham Methodology

Graham’s investment strategy, which generated approximately 20% annual returns from 1936 through 1956 — substantially exceeding the market’s 12.2% average — emphasizes mathematical objectivity and margin of safety. By focusing on stocks trading below intrinsic value with fortified balance sheets and consistent profit generation, Graham’s framework filters out speculative noise and identifies genuine value opportunities.

Among these five healthcare selections, only Molina Healthcare fully satisfies Graham’s demanding criteria at the highest confidence level, making it the purest expression of value investing principles within this sector sample.