Monday, February 26, 2007

Calls of Note Part 1

- Citigroup notes the Congressional Budget Office (CBO) on Friday released a report on budget savings and spending options that it releases every two years. The "Budget Options" report is not a list of CBO-endorsed savings recommendations, but rather is intended to be an aid to Congress on the positive or negative spending impact that would result from enactment of various policy options. CBO culls the options from a range of sources: legislative proposals, the President's FY2008 budget, Congressional and CBO staff, government agencies, and private groups.

CBO devotes a section to potential Medicare savings, including Medicare Advantage. This caused a sell-off of managed care stocks late Friday, particularly Humana (NYSE:HUM) (stock dropped 3% in 8 mins & closed -2.3%); however, the Medicare Advantage savings options are no different from those that were contained in the CBO report two years ago.

Firm thinks sell-off on HUM was over-done. They expect a rebound on Monday when investors realize there is nothing new here. Reiterates Buy on HUM as the stock is trading at a forward P/E at the low-end of its historical range.

They also reiterate Buy UNH, WLP, CVH, HNT, and Hold AET.

Notablecalls: Nice call by Citi, although I must note I think most of the bounce already happened late Friday (up a point from lows). There may however be some shorts left to squeeze early on. One to watch. Not calling this outright actionable.

No comments: