Monday, November 13, 2006

Calls of Note Part 7

- Goldman Sachs has added Humana (NYSE:HUM) to the Americas Conviction Buy List as they believe the recent sell-off in Humana stock has led to a particularly attractive buying opportunity with shares now trading at under 13X 2007 EPS. Firm expects near-term rationalization of market concerns over the potential for Democrats to enact unfavorable changes to the Medicare Advantage (which they think is unlikely). GS sees 27% upside to their 6-month price target of $66.

Catalyst: As the Democrats legislative priorities become clearer to the market over the next several weeks, the firm expects market concerns on impact to Medicare Advantage will diminish. Humana shares have now fallen nearly 30% from their month-ago level providing an opportunity for investors to buy the stock at less than 13X 2007 EPS (vs. the high-teens multiple that's prevailed for much of this year). While changes to the Medicare standalone drug program are a possibility (though still not likely, in firm's view), they think the odds of substantial change to the MA health plan program (which is what really matters to Humana) are remote.

Notablecalls: Expect to see a bounce! Actionable call alert!

1 comment: said...

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