is the head of Greenlight Capital, a hedge fund. He has
positioned his portfolio to benefit from a repeal of Obamacare by
buying mostly health care stocks. "While the stocks are already
cheap, there is the additional unpriced upside in the possibility
that the election changes the political landscape, resulting in a
possible modification or repeal of Obamacare," he said in
his second quarter letter
These are his largest new buys in the second quarter: CIGNA Corp.
), Coventry Health Care (
), UnitedHealth Group (
), Humana (
) and WellPoint (
Einhorn bought 6,435,000 shares of
in the second quarter of 2012 at an average price of $46. Cigna's
stock has declined almost 8% over the last five years.
CIGNA Corporation is an investor-owned global health services
benefits organizations in the U.S. CIGNA a Corporation has a
market cap of $12.63 billion; its shares were traded at around
$43.6 with a P/E ratio of 8.7 and P/S ratio of 0.6. The dividend
yield of CIGNA Corporation stocks is 0.1%. CIGNA a Corporation
had an annual average earnings growth of 9.2% over the past five
Einhorn wrote in his
second quarter letter
: "CI is a managed care company with three primary divisions:
Cigna HealthCare, Cigna Group Disability and Life, and Cigna
International. Cigna HealthCare, which comprises about 70% of
CI's profits, offers medium and large companies traditional
risk-based insurance, in addition to administering plans for
those that prefer to self-insure. Cigna HealthCare recently
bought HealthSpring to enter the fast-growing Medicare Advantage
market. Cigna Group Disability and Life is a low-growth, stable
business. Cigna International, which provides insurance policies
for individuals, as well as insurance and administrative services
for multinational companies and governments, is growing at more
than 20% per year. We believe that CI deserves a higher multiple
because the plan administration business is a service business
that doesn't take risk, and the other divisions do not warrant
discounted values. Our purchase price of $45.42 per share valued
CI at less than 8x estimated 2012 EPS and approximately 6x our
forecast of post Obamacare 2014 EPS. CI shares closed the quarter
at $44.00 each."
Einhorn bought 6,660,000 shares of
Coventry Health Care (
at an average price of $32 in the second quarter of 2012.
Coventry Health Care Inc. is a managed health care company
operating health plans under the names Coventry Health Care,
Coventry Health and Life, HealthAmerica, HealthAssurance,
HealthCare USA, Group Health Plan, SouthCare, Southern Health,
Carelink Health Plans and WellPath. Coventry Health Care, Inc.
has a market cap of $4.64 billion; its shares were traded at
around $32.29 with a P/E ratio of 11.9 and P/S ratio of 0.4. The
dividend yield of Coventry Health Care Inc. stocks is 1.5%.
Coventry Health Care Inc. had an annual average earnings growth
of 17.8% over the past 10 years.
Einhorn mentioned Coventry Health Care and Cigna in his
second-quarter letter: "The Partnerships established several
substantial new positions in the managed care sector, including
) and Coventry Health Care (
). The entire sector had been battered in anticipation of
Obamacare. For the most part, these companies have unlevered
balance sheets and trade at single-digit P/E multiples on
earnings that should continue to grow. They have no exposure to
the European currency crisis, a possible Chinese slowdown or
other cyclical headwinds. While the stocks are already cheap,
there is the additional unpriced upside in the possibility that
the election changes the political landscape, resulting in a
possible modification or repeal of Obamacare."
He continued about CVH: "CVH is a regional managed care company
with operations in the mid-Atlantic, Midwest and parts of the
South. The company offers commercial risk-based insurance and has
an expanding business in the government-sponsored Medicaid and
Medicare programs. Problems with a recently-acquired three-year
contract to provide managed care services to the Medicaid
population in Kentucky caused the company to significantly reduce
earnings guidance for 2012. This led to a large drop in the stock
price. We believe the issues related to the Kentucky contract are
manageable and finite, and CVH will return to breakeven or a
profit on this contract in 2013 from a loss this year. Our
average purchase price of $31.22 represents 8x our forecast for
2014 earnings net of $6 per share of cash and reflects our
estimate of the negative impact of Obamacare. CVH closed the
quarter at $31.79 per share."
Einhorn bought 2,285,000 shares of
UnitedHealth Group (
at an average price of $57 in the second quarter.
UnitedHealth Group Inc. offers health care coverage and related
services to help people achieve improved health and well-being
through all stages of life. UnitedHealth Group Inc. has a market
cap of $53.85 billion; its shares were traded at around $51.91
with a P/E ratio of 10.6 and P/S ratio of 0.5. The dividend yield
of UnitedHealth Group Inc. stocks is 1.6%. UnitedHealth Group
Inc. had an annual average earnings growth of 18.2% over the past
10 years. GuruFocus rated UnitedHealth Group Inc. the business
predictability rank of 3.5-star.
Einhorn bought 1,645,000 shares of
at an average price of $82. The stock has dropped 19% since.
Humana Inc. is a health services company that facilitates the
delivery of health care services through networks of providers to
its medical members. Humana Inc. has a market cap of $11.03
billion; its shares were traded at around $66.59 with a P/E ratio
of 9.1 and P/S ratio of 0.3. The dividend yield of Humana Inc.
stocks is 1.5%. Humana Inc. had an annual average earnings growth
of 23.5% over the past 10 years. GuruFocus rated Humana Inc. the
business predictability rank of 5-star.
Einhorn bought 1,930,689 shares of
at an average price of $67 in the second quarter.
WellPoint Inc. is the largest publicly traded commercial health
benefits company in terms of membership in the United States.
WellPoint Inc. has a market cap of $19.16 billion; its shares
were traded at around $56.89 with a P/E ratio of 8.1 and P/S
ratio of 0.3. The dividend yield of WellPoint Inc. stocks is 2%.
WellPoint Inc. had an annual average earnings growth of 17.2%
over the past 10 years. GuruFocus rated WellPoint Inc. the
business predictability rank of 4-star.
See David Einhorn's portfolio here. Also check out the
Undervalued Stocks, Top Growth Companies, and High Yield stocks
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