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HEALTH PLANS: Trading health plan stock rumors for fun & profit

Just when you thought stock action in health plans was all dull, along comes a little fun. Wellcare’s chart of course looks about as good as the average stock chart when the Feds raid. Whatever the company says, Wall Street believes it’s bad news. $120 to $25 in 5 days is Enron-type numbers, and one rumor is that some directors were selling not a couple of months back, but a couple of weeks.

Wellcare

But the fun continues. Humana is the “big” health plan that’s made the greatest push into Medicare Private FFS where most of the abuses have occurred and it’s also huge in Florida. (I don’t have to explain that statement I hope). That was enough for one analyst to say on Friday that they heard the sound of FBI sirens too, and the stock fell about 5% in a few minutes, before recovering when it was confirmed that the sirens were in his head. (OK, maybe the FBI doesn’t use sirens!)

Humana

But then Humana released some great financial results on Monday and the stock rallied on the opening up 5% from where it had been, but then ended up falling more than 10% on the day. Why? Well perhaps its because when some smart types look at the numbers they notice that the MLR fell from 84% to 81% in a year. So first, what happened that there was such a big fall? And second, if most of this increased profit comes from the Medicare business, why would the end-payer (you and me represented by Pete Stark et al) put up with it?

This of course makes Humana a fun stock for the swing traders on the message boards. But I’m not so sure it makes for great public policy.

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RobMGGregory D. Pawelski Recent comment authors
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Rob
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Rob

Analysts, despite the lessons of the ’90s, cannot always be trusted not to be pushing a stock for the sake of not angering the client.
As for suddenly having good numbers, I refer you to Enron, in which suddenly having good numbers at the last minute was job one.
Maybe it’s all on the level. Somehow I’m skeptical.

MG
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MG

The really interesting thing about Humana is looking at recent stock analyst ratings. They are really are across the gambit and I wonder who has what type of information here. For example, the analyst at Citi who covers Humana is pushing hard on his “Buy” recommendation. Either he is just trying to make a name for himself by taking a contrary/bold prediction and/or he has some interesting insights most other people are missing. I wonder if that information has something to do with what Rengel and the Democrats are going to do about fixing the scheduled payment cut in Medicare… Read more »

Gregory D. Pawelski
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Gregory D. Pawelski

Hedge fund managers have been able to manipulate security prices for quick gains.
http://www.usatoday.com/money/markets/2007-03-23-cramer-usat_N.htm