Could Centene (CNC) Be Entering a Major Margin Recovery?

Could Centene (CNC) Be Entering a Major Margin Recovery?

Wed, August 5, 2026 at 5:45 PM GMT+3 3 min read

• CNC +4.23%
• CL=F -0.82%

Diamond Hill Capital, a First Eagle Investment Management company, issued its Q2 2026 investor letter for its "Mid Cap Strategy". A copy of the Q2 2026 investor letter can be downloaded here. In the quarter, equity markets posted strong returns as resilient economic growth and robust corporate earnings supported investor sentiment, although AI-related companies continued to dominate market leadership. Technology was the strongest-performing sector, while industrials also advanced and energy lagged as oil prices declined. The Fund returned 7.92% and the Russell Midcap Index returned 13.83%. Health care holdings were the largest positive contributor, supported by strength across managed care, diagnostics, and life sciences. However, stock selection and an underweight position in information technology remained the main relative headwinds. The strategy maintained limited exposure to highly valued semiconductor and memory companies, reflecting concerns that current valuations assume an extended period of elevated AI spending. It also continued to assess software and services businesses individually based on how AI may affect their long-term competitive positions. Management emphasized higher-quality companies, attractive valuations, capital preservation, and durable long-term compounding while remaining cautious about elevated valuations, concentrated leadership, and the sustainability of the current AI investment cycle. Please review the Strategy's top five holdings for its key selections.

In its second-quarter 2026 investor letter, Diamond Hill Capital Mid Cap Strategy highlighted Centene Corporation (NYSE:CNC) as a newly added position. Centene Corporation (NYSE:CNC) is a US-based healthcare enterprise that offers services to underinsured and uninsured families and commercial organizations. On August 4, 2026, Centene Corporation (NYSE:CNC) closed at $64.07 per share, reflecting a market capitalization of $31.49 billion. Centene Corporation (NYSE:CNC) posted a one-month return of -3.57%, while its shares gained 164.18% over the past 52 weeks.

Diamond Hill Capital Mid Cap Strategy stated the following regarding Centene Corporation (NYSE:CNC) in its Q2 2026 investor letter:

"We initiated a position in managed care provider Centene Corporation (NYSE:CNC) as we believe managed care margins now have a realistic path to recovery over the next few years as reimbursement rates catch up with underlying cost trends across the insured population."

Centene Corporation (NYSE:CNC) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 72 hedge fund portfolios held Centene Corporation (NYSE:CNC) at the end of the first quarter, compared to 78 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 a list of companies that beat earnings expectations. In Q2 2026, Centene Corporation (NYSE:CNC) contributed to Hotchkis & Wiley Mid-Cap Value Fund's performance. In addition, please check out our hedge fund investor letters Q2 2026 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published atInsider Monkey.