3SOF

I'm recommending buying WCG for the Stocks on Fire Portfolio, 6.66% of capital as always.

Initially I made this 3 minute video on elliemae's request (she works in a similar company as WCG, so she knows the sector very well):

WCG 3 minute view:

http://video.google.com/googleplayer.swf?docId=224744204231640346&hl=en

And now I made a bit more in depth analysis of WCG:

http://video.google.com/googleplayer.swf?docId=-1271359871314072297&hl=en

I think the following can be huge, going forward:

«Medicare Private Fee-For-Service. We have received approval from CMS to offer private fee-for-service ("PFFS") plans to Medicare beneficiaries in 700 counties in 38 states and Washington, D.C. beginning in 2007. PFFS plans are open-access plans that allow members to be seen by any Medicare-eligible physician or facility that participates in the program. In connection with this initiative, we have developed a national distribution network of licensed insurance agents to educate potential members on our open-access PFFS plans. Enrollment for all 2007 PFFS plans will begin November 15, 2006.»

Trading Plan:

Buy 6.66% of capital in WCG shares

David,

Thank you for your thorough analysis on WCG.  I have been a believer in WCG since I bought it back in 2005.  If you can block out the market noise, WCG will be a huge winner in the future.  If the govt. cuts medicaid and medicare in the future, WCG still wins, because the govt. utilizes companies like WCG to help cut/control costs.  If memory serves me correctly, WCG has only been utilized in 8 states to date and has huge growth potential.   
Thanks Again, Ellen

WCG has been a great holding for your elliemae :) I guess it will be good for me too when I have the chance to buy it.

I'm sorry, but being a foreigner I wasn't aware that today is a national holiday in the USA, in memory of Martin Luther King Jr. :-[

I guess I'll go to the jacuzzi, sauna and take a walk ... I really wasn't expecting some time off now, great (http://mdteague.com/DancingSmile)

HEHEHEHE, Me too David, I was so eager to get into WCG that I didn't noticed that today is bank holiday at USA....I got so hurried with my streamer frozen that I tough that is was my job's firewall doing some of his tricks instead of even thinking that it was holiday   ;D ;D ;D

Quote from: Dracull on January 15, 2007, 09:55:04 AM
HEHEHEHE, Me too David, I was so eager to get into WCG that I didn't noticed that today is bank holiday at USA....I got so hurried with my streamer frozen that I tough that is was my job's firewall doing some of his tricks instead of even thinking that it was holiday   ;D ;D ;D

Heh, neither of you should feel bad. Every day in January thus far seems to be a holiday. In fact, of the 11 potential sessions we have had to date, three of them have been closed. One might say the market is closed 27% of the time!

This is just great!
I remember reading a "buy my research report" on something like this.
They were touting a health care company that was buying up Federally Funded Psychiatric beds (worth over $100K/yr each). Huge revenue growth was projected.
I forget the exact numbers and can't find the article. Doing my web search, I thought it was MGLN? (I'll keep looking).

Elliemae
Could it be WCG instead that is acquiring these Psychiatric Beds?

Thanks and Best
GMan

It is a holiday today, however, I am working and will try to update some info. on WCG later tonight when I have time.  Have a great day!

For now, I think I'm gonna wait till it retraces to the 5EMA, like about $73.  The bollinger band squeeze play is over cuz it already made a red candle and failed to make a new high on Friday.  There's plenty of time till earnings (Feb. 12), so I would buy the Feb 70 call options after a 5 or 10EMA retracement and bounce.

Usually, a stock like this may be a good LEAPS or stock-split candidate, too, but the open interest in the leaps is not high enough, and there aren't many strike prices far out of the money.

Leaira

Elliemae
Could it be WCG instead that is acquiring these Psychiatric Beds?

Not to my knowledge

For now, I think I'm gonna wait till it retraces to the 5EMA, like about $73.  The bollinger band squeeze play is over cuz it already made a red candle and failed to make a new high on Friday.  There's plenty of time till earnings (Feb. 12), so I would buy the Feb 70 call options after a 5 or 10EMA retracement and bounce.

Leaira is probably right, this stock has pulled back 3-10% on profit taking, etc.. just to resume back up, however, in the long term picture, timing an entry point could be futile.

I first became aware of WCG when my 21 year old son was in his junior year of college and had gone to a job fair in Nov. 2005 and had met a rep. from WCG.  My son was very impressed and told me to investigate the co. for investing (he graduates this spring with a B.B.A. in Actuarial Science and took a job with Property and Casualty instead of Health and Life, like WCG)  Anyways, I researched WCG and took a position in Nov.2005.  Well, I live in Atlanta, Georgia and I am a Physical Therapist that provides services to patients on Medicare, Medicaid, and private ins.  Beginning June of 2006, Georgia Medicaid required CMO's and 3 managed care co. were contracted (Amerigroup, Peachstate, and Wellcare/WCG)  Georgia Medicaid program has been financially strapped in the last 5 years and personally, an hour visit for a P.T. had gone from $107.00 in 2000 to $85.00 an hour in 2005.  Well, every sector of healthcare provided to Medicaid recipients had been cut as well.  In 2005, the state of Georgia had to come up with a plan to control/cut cost for their Medicaid members, and in all reality, no more cuts could be made to providers, for the payout was already at it's minimal amount that would support healthcare providers and still make a profit (in some cases break even for doctors/hospitals)  So Georgia Medicaid has implemented the managed healthcare cos. (which WCG is across the state of Georgia, not just in selected regions like Amerigroup and Peachstate)  This is saving Georgia's Medicaid system millions of dollars per year.  It helps prevent hospital visits and keeps providers accountable for services provided.  Prior to this implementation, Medicaid providers were virtually unsupervised.  If 2 one hour therapy sessions a week were allowed for a child, an unethical provider could provide services to a disabled child for years, as long as they kept a doctors prescription on file every 6 months.  Now with the CMO's in place, each provider has to get authorized for a limit # of visits and then provide documentation to support future visits that are medically necessary .  This is just one area of healthcare given as an example here, but it applies across the board to all Medicaid providers.  Now, If WCG is only in 8 states and has the potential to expand across the country as other states try to curb their healthcare cost, and now put Medicare into the mix (and you know as the baby boomers age Medicare becomes more strained)  I believe WCG will be utilized for Medicare exponentially in the future (because again, you can only cut payment to healthcare providers so much, and then you have to look for new ways to save money)  I know this was long, but I hope I opened some eyes as to the powder keg WCG is becoming.  Take a look at  WLP and I believe the market cap of WCG could be 68 billion in 7-8 years easily ;D

Volume down a bit today
93% ownde by institutions....
I am assuming this is a good thing.  8)
Although, I've read it is good to get into a stock before the institutions drive the price up.  Davids analysis really helps to see if there is more upside from here.
Best
GMan

Volume down a bit today
93% ownde by institutions....
I am assuming this is a good thing.  Cool
Although, I've read it is good to get into a stock before the institutions drive the price up.  Davids analysis really helps to see if there is more upside from here.
Best
GMan

I believe the institutions understand the potential growth of this company versus the average retail investor ;)

Unfortunately I'm left with little time to update WCG today. Its chart is so bullish that is scary ... wait a minute, so bullish it is scary? That doesn't make any sense, being bullish is great, the more, the better !

This stock could/should move up to $100 over the short term. It would still be very cheap.

Not much thinking to do here, just buy and hold through the ups and downs, elliemae nailed it right and all you have to do is let the stock reward your investment and patience.

Just considering 2007 estimates and not a longer term picture, the revenue estimate for WCG is $4.73 B.

The current market cap is $3.06 B. If the stock trades at a revenue multiple of 1 in 2007, it will then be a $4.73 B market cap company. To achieve that the share price must rise 54% to $116 a share.

Over the short term there might be a pullback because it seems kind of overextended, but a 54% medium term profit is very attractive and I think it justifies not paying much attention to short term developments.

Longer terms the growth rate may continue and WCG looks like a stock to own for the very long term.

Thanks Leaira
I played your pull back and got in at $73.5.
Applause
Now I'm in margin debt big time! LOL

Maybe MGLN is worth looking at too?

Best
GMan

WCG always retraces some when healthcare cuts are in the media, however, WCG is not like the UNH's and WLP's that supply individuals bare bones healthcare to self payors that want minimum coverage, WCG has relationships/contracts with State funded and federal programs like Medicaid and Medicare.  WCG is growing!!  Don't listen to the noise, buy low and buy lower if you have to, because this will be a monster company in the long run. :D 

Quote from: guitarman on January 18, 2007, 12:54:42 PM
Thanks Leaira
I played your pull back and got in at $73.5.
Applause
Now I'm in margin debt big time! LOL

Maybe MGLN is worth looking at too?

Best
GMan

G-Man,

Did you buy the stock or the call options?

I didn't get in yet.  I didn't want to buy on a down day like today -- too much selling pressure.  I see that the stock went down below the 10EMA and came back just below it, but still on high volume.  This might go down to bounce off the 20EMA at about 71.75 before continuing the uptrend.  I'll buy the call options if it does that. 

I'll prolly get them for about $4 a share (70 calls, that is) if the stock is at 71.75.  The open interest is 102, so it's barely high enough for me to consider it.  I won't get any more than 10 contracts.  The 75 calls have more open interest, but the delta isn't quite high enough cuz they're out of the money.

Maybe I'd be better off doing a bull put spread, like the Feb 70/65.  There's $1.05 natural credit in it right now.  There would be more if it comes down more, but I'd wait for a bounce off the 20EMA.

Leaira

Quote from: Leaira on January 18, 2007, 09:43:27 PM

Quote from: guitarman on January 18, 2007, 12:54:42 PM
Thanks Leaira
I played your pull back and got in at $73.5.
Applause
Now I'm in margin debt big time! LOL

Maybe MGLN is worth looking at too?

Best
GMan

G-Man,

Did you buy the stock or the call options?

I didn't get in yet.  I didn't want to buy on a down day like today -- too much selling pressure.  I see that the stock went down below the 10EMA and came back just below it, but still on high volume.  This might go down to bounce off the 20EMA at about 71.75 before continuing the uptrend.  I'll buy the call options if it does that. 

I'll prolly get them for about $4 a share (70 calls, that is) if the stock is at 71.75.  The open interest is 102, so it's barely high enough for me to consider it.  I won't get any more than 10 contracts.  The 75 calls have more open interest, but the delta isn't quite high enough cuz they're out of the money.

Maybe I'd be better off doing a bull put spread, like the Feb 70/65.  There's $1.05 natural credit in it right now.  There would be more if it comes down more, but I'd wait for a bounce off the 20EMA.

Leaira

Leaira,

You sound like a veritable options guru now  :)
Seems like you have been really doing your homework, and doing well also?
Can you suggest some resources and or books on the subject that you felt were the best?

Quote from: elliemae on January 18, 2007, 08:29:13 PM
WCG always retraces some when healthcare cuts are in the media, however, WCG is not like the UNH's and WLP's that supply individuals bare bones healthcare to self payors that want minimum coverage, WCG has relationships/contracts with State funded and federal programs like Medicaid and Medicare.  WCG is growing!!  Don't listen to the noise, buy low and buy lower if you have to, because this will be a monster company in the long run. :D 

I fully agree with elliemae, and the fundamental trends show just that:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=31988;image)

Technically it is possible for WCG to go down to the 50 days SMA, or even lower, as it has done that in the past, as you can see on the chart below. But, given the fundamental trends, I expect it to rise 40 or 50% for the full year 2007.

I'll keep holding this great stock.

As you can see on the graph below, the 4th quarter is expected to be the best ever for WCG in EPS terms:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=32110;image)

This on top of an already extremely strong 3rd quarter. However, 1Q 2007 estimates are for a sharp decline, from $1.33 this quarter to $0.49 on Q1 2007.

I wonder why ... there are  less analysts (http://finance.yahoo.com/q/ae?s=WCG) estimating that quarter too. Anyway, estimates for the full year 2007 are for EPS of $3.98, but I think there's room to surprise on the upside, as the company has been doing that every quarter:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=32111;image)

Technically we had a little bounce on Friday, but nothing significant. I'll continue holding WCG.

WCG is holding quite well in the face of a weak general market, because it is a health related undervalued growth stock. It doesn't depend on the economic condition of the country (at least not in cyclical terms).

I'll keep holding WCG. 

There was a report out yesterday saying Barclays Global Investors owns 2,798,588 shares of WCG, or 6.87% of the company.

I think they're smart in buying/holding WCG. I'll keep holding the stock.

Nothing new on WCG today, pushing higher as it should. I'll hold.

Remember we didn't check WCG's balance sheet? Well, here it is:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=32337;image)

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=32338;image)

I think it is a fairly normal balance sheet for a $3 B company like WCG.

WCG is a great stock but it doesn't go up everyday, just on average. I'll keep holding it.
   

Learn more about WCG's business on their website: www.wellcare.com (http://www.wellcare.com/)

Nothing new on the technical front and no news out. I'll keep holding WCG.

Yesterday WCG closed at a new all time high of $76.94. Just sit tight and let the profits run.

Nothing new on WCG, just HOLD.

2007 earnings estimates are $3.98 EPS for WCG. So, the current forward earnings multiple is $77.48/$3.98 = 19.47.

The Health Care Plans industry average is 18.

But, WCG is growing revenues by 103% from the prior year and the industry is growing just 13%. That's why I consider it cheap.

Another new all time high yesterday. Just sit tight and keep holding.

Another day, another new all time high for WCG. And when this $3 B market cap company moves, it won't undo that move easily. It is a safe investment.

I have a 5.36% profit on WCG and of course I'll keep holding.

WCG stock has been rising on average, but understandably it's not able to rise everyday. On Friday it went down 1.49% on profit taking.

Earnings will be out on February 13, after the market close. I'll keep holding through earnings, the stock is still undervalued and I expect analysts to start raising those 2007 earnings estimates, which look too low to me, standing at $3.98 EPS.

WCG touched the previous resistance, now support level of $76.73, I think it is getting ready for another bull run.

Anyway, whatever happens to the share price over the short term, this is a business I want to hold for the long term, as I think elliemae is right, this company can be a $100 B giant 10 years from now, as they expand operations from the current 8 states to the whole country.

QuoteWCG touched the previous resistance, now support level of $76.73, I think it is getting ready for another bull run.

No news out and nothing else to do but to keep on holding WCG.

Nothing new on WCG, just keep holding.

Perhaps WCG will need to make another correction towards the 50 days moving average (which closed yesterday at $70.4), I don't know, but I'll continue holding WCG for the long term.

I want to be exposed to the health care industry in the US and WCG is the best pick in the sector that I know of, growing rapidly and very profitable, as you can read on the rest of this thread.

You can see on the all history chart below that WCG's trend is bllish since it became a publicly traded company in 2004. The stock rose every year, but not every month.

I'll keep holding WCG with long term eyes and hands. Because the fundamental trends tell me the stock will keep rising, and rising, and rising, year after year.

I need to hold something related to health care and WCG is the best pick that I know of in that sector.

WCG is the largest company in the Main Portfolio (http://www.3stocksonfire.org/3stocksonfire.php), and it feels good to own just a few medium size caps, I think it adds stability to the portfolio.

One could think such a large cap doesn't have all that much potential, and that's true, if one is looking for short term results, but if we consider long term fundamental trends instead, WCG is the fastest growing company in the Main Portfolio, with a 60% plus historical average annual revenue growth :o

I'll keep holding WCG.

WCG just keeps hitting the ball out of the park with earnings and membership enrollment.  WCG won't double overnight, but look back in 14 months and it will!!  Patience will be rewarded ;)

Quote from: elliemae on February 13, 2007, 09:16:20 PM
WCG just keeps hitting the ball out of the park with earnings and membership enrollment.  WCG won't double overnight, but look back in 14 months and it will!!  Patience will be rewarded ;)

Thanks for the post elliemae, I was feeling a bit lonely on this thread :)

• WellCare Announces Fourth Quarter and Full-Year 2006 Results (http://biz.yahoo.com/bw/070213/20070213006317.html?.v=1)
Business Wire (Tue 4:00pm)

For 2006 analysts expected EPS of $3.37 on $3.67 B revenue. Actual figures came in higher, EPS was $3.43 and revenue was $3.8 B.

The company also raised guidance for 2007:

• Wellcare Increases 2007 Outlook (http://biz.yahoo.com/ap/070213/wellcare_outlook.html?.v=1)
AP (Tue 4:44pm)

Now the company is talking about EPS between $4.10 and $4.20 and revenues of $4.95 B for fiscal 2007.

I actually think this guidance is still quite conservative, it looks like an extrapolation of just the 4th quarter numbers. I believe the company will raise guidance even more going forward, because membership growth is strong, and the more, the more, as the word spreads.

WCG closed up 1.9% in after hours.

I'll make a more detailed analysis in subsequent updates, I'm short on time now. I'll continue holding WCG.

This is one of my favorites David...no need to feel lonely.

Much thanks to you and elliemae...

Kent

Ditto!
You rock David!
I went on margin to get this one!
No Options!  - Sorry I didn't respond earlier.
I was on vacation.
Best
GMan

Nice to have some company :)

WCG started yesterday with the "sell on the good news because we're making some money and we don't want more" type of mentality. That gave an opportunity to long term investors to load the truck on the dip that almost touched the ascending 50 days SMA.

I think WCG's results were great and the best is yet to come. Watch as WCG pushes up to a new all time high above $80.

WCG's subscriber numbers increased 164% in 2006, as you can read on the table below that was taken out of the latest 10-K filed with the SEC:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=33546;image)

The big jump of 1,403,000 subscribers came primarily from PDP (Prescription Drug Plans) and TANF (Temporary Assistance to Needy Families).

In January 2007 WCG began operations as a PFFS (private fee-for-service) plan and one month later they already had 18,000 members enrolled in this plan. So this is a new and important source of growth for 2007.

We'll keep studying this company's operations throughout these updates. The only risk I see is that the contracts with the government are short in duration and they can be terminated, but I rely on elliemae's judgment that says the government saves money using these companies. By the way elliemae, when you have some time, being a professional health care service provider yourself, could you elaborate on how the government saves money by making these contracts with companies like WCG? Thanks  :)

Since WCG helps the government saving taxpayers money I think the company is here to stay and prosper.

There's strong revenue and EPS growth expected for 2007 and beyond:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=33547;image)

I'll continue holding WCG.

David,
   
The way I see it as a provider, WCG is like the audit police for the government.  They receive a premium per membership, and the provider's must request authorized visits/treatments for the patient.  Basically, as a provider, you have to jump through hoops to get authorization/paid.  However, the waste in health care has been rampant and this service protects/polices all parties involved in the care of the patient (provider/patient/government payee, tax payers).  I know this sounds cynical, but the truth is the truth.  Anyways, WCG and companies of this type will be utilized to save the government money in all areas, because fees are already stripped down for medicaid/medicare reimbursement and providers won't take anymore cuts.  For a 1 hour P.T. visit, Medicaid pays $85.00, and now that you have to go through a CMO like WCG, you still get $85.00 for a 1hr. visit (unless you are not an authorized provider, then you get 10% less for authorized services $76.50)
The real savings for the government comes in when a treatment/procedure is deemed not medically necessary and is not authorized.  I also forgot the paperwork trail that encompasses the process to get authorized visits, or extended visits (makes a provider think twice about visits/treatments needed)
I remember about 10 years ago there was a Psychiatrist in Atlanta, Ga. that would round Medicad children up on buses with parental consent for CAMP and would charge Medicaid for psychiatric eval./treatment and made over $2 million in 1 year.  When this was brought to the news media, Medicaid's response was it was unethical but not illegal!!  Well, this isn't going to happen with CMO's ;)

Great post elliemae, thanks a lot :)

So, the government pays $85 an hour for a P.T. visit (whatever P.T. is - I don't know what it is, but given the context, I figure it is something like "personal trainer", or "personal therapist" or "private therapist"). And that is less than what it used to be, if I correctly recall one of your previous posts.

And people in Europe say the US doesn't have social security and social programs ... of course, Europeans don't have a clue.

Nevermind that, I now understand how the government saves money making contracts with companies like WCG. WCG is here to stay and prosper.

Today I don't have all that much time to study, but let's just make four questions for tomorrow. That PDP (Prescription Drug Plans) were the biggest source of growth for WCG? They're provided on a nationwide basis, right? How much do they cost? How much is the net profit margin on each of these plans?

In the meantime, WCG shares are doing what they were supposed to do, given the fundamentals. I already see $100 on my chart. I'll keep holding.

I read the entire 10-K and there's no information to answer the questions made above. Anyway, WCG closed at a new all time high yesterday and fundamentals in a general sense are attractive, I'll continue holding WCG. As I see it, in the future, the company can be as large as any one of its competitors, say, $60 B market cap?  :o

There was an analysis out from Zack's yesterday, saying the following:

«WellCare Health Plans topped estimates by five cents with fourth-quarter earnings of $1.38 per share. Revenues and membership more than doubled thank to the addition of Medicare Part D products and the launch of a Georgia Medicaid health plan. The medical expense ratio improved to 78.4% from 80.2%. Following the strong fourth-quarter performance, WCG raised its 2007 profit guidance to between $4.10 to $4.20 per share, from $3.95 to $4.05 per share. Nearly all of the covering brokerage analysts revised their forecasts in response, causing the consensus estimate to rise by 13 cents to $4.11 per share. WCG is a Zacks #1 Rank ("strong buy") stock.»

And WCG closed at a new all time high of $82.37. Slowly I now have a 10% profit on the stock. The beauty of this is that I think the stock won't give back this gain all that easily.

See you at $100 :)

Small correction on WCG on Friday, nothing changed from a technical or fundamental perspective, I'll keep holding.

WCG is the biggest company in the Main Portfolio (http://www.3stocksonfire.org/3stocksonfire.php), and probably the safest investment.

I'll keep holding it.

WCG would be a great defensive play if my outlook (http://www.3stocksonfire.org/trading/index.php?topic=9050.msg90421#msg90421) materializes, but I think it will at least have a correction towards the $60 - $65 200 days moving average support.

I'll take profits on WCG today.

WCG is a great stock in bull or bear markets. Its revenues and profits are independent from the economic cycle. I was in no right to sell it, so I want it back, it doesn't matter it is at a higher price.

The trading plan is:

Buy 6.66% of capital in WCG.

Growing # of shorts

WCG    $ 85.66
Wellcare Health Plans   0.56
Shares Short   3,073,550
Days to Cover (Short Ratio)   5.3
Short % of Float   9.85 %
Shares Short - Prior   3,041,524
Short % Increase / Decrease   1.05 %

Quote from: yukiii on March 08, 2007, 04:06:26 PM
Growing # of shorts

WCG    $ 85.66
Wellcare Health Plans   0.56
Shares Short   3,073,550
Days to Cover (Short Ratio)   5.3
Short % of Float   9.85 %
Shares Short - Prior   3,041,524
Short % Increase / Decrease   1.05 %

Yesterday's Fast Money they called WCG a good short.

Thanks for the information yukiii and nullzero :)

Over the last month WCG received three downgrades: http://finance.yahoo.com/q/ud?s=WCG

As you know I don't guide my investment decisions by big institution's recommendations, since I don't pay them anything for them to give me something.

I'm fully aware that WCG has had a nice run, and it may pullback and have a correction, but I see it as a defensive play in bull or bear markets. Its business is independent from the economic cycle.

The company's subscriber base can grow, and grow and grow, from the current  2,258,000 to more than 20 million in a few years time. My investment is based on that prognosis.

I'll continue holding WCG.

FYI,

Weakness in WCG today...

Credit Suisse downgraded WellCare Health (WCG - Cramer's Take - Stockpickr - Rating) to Neutral from Outperform. Cites reimbursement risks are not reflected in valuation. Maintained $80 target price.

Quote from: JKN on March 09, 2007, 10:08:03 AM
FYI,

Weakness in WCG today...

Credit Suisse downgraded WellCare Health (WCG - Cramer's Take - Stockpickr - Rating) to Neutral from Outperform. Cites reimbursement risks are not reflected in valuation. Maintained $80 target price.

Thanks for posting the news JKN :)

WCG has been downgraded by four times over the last month (http://finance.yahoo.com/q/ao?s=WCG), but I never make my decisions based on brokerages downgrades or upgrades.

To me WCG is cheap based on its historical average annual earnings growth of 62%, which in fact is the highest I've ever seen. There's always the possibility of the government cutting spending and reimbursement rates on Medicare and Medicaid, but WCG's subscriber base growth will more than compensate that possible (but not probable) outcome in my opinion.

I'll continue holding WCG.

Yesterday we had consolidation in WCG's health care industry, with ...

• UnitedHealth to buy Sierra Health for $2.4 bln (http://biz.yahoo.com/rb/070312/sierra_unitedhealth.html?.v=8)
Reuters (Mon 8:20pm)

... and WCG rose to a new all time high.

According to the video I made for WCG, in the beginning of this thread, here it is:

http://video.google.com/googleplayer.swf?docId=-1271359871314072297&hl=en

... WCG is probably the best long term holding of the Main Portfolio (http://www.3stocksonfire.org/3stocksonfire.php), with an historical growth rate of 62%.

I'll continue holding WCG for the long term.

WCG went down a bit in sympathy with the general market, as traders sell great stocks to compensate for losses elsewhere. Longer term only fundamentals matter and WCG is the strongest company from a fundamental standpoint I ever found out, so I'll keep holding WCG whatever happens.

Nothing new on WCG, I'll keep holding this 10 stars stock.

WCG is a stock that let's me sleep well at night. It is also he best long term value I've ever found, as you can see on the video above.

I'll continue holding WCG.

WCG will be added to the S&P MidCap 400 index:

• Standard & Poor's Announces Changes to U.S. Indices (http://biz.yahoo.com/prnews/070316/nyf119.html?.v=6)
PR Newswire (Fri, Mar 16)

I guess that in a year or so it will also be added o the S&P500 index, as it surpasses $6 B in market cap ($3.5 B now).

I'll continue holding WCG.

Nice bull run to a new all time high, as WCG is being added to the S&P 400 MidCap index. I like the feeling of owning a stock trading at all time highs.

I wonder if WCG will be able to maintain or even expand its net profit margin, which was 4.78% in Q4 2006. That would be super!

I'll keep holding WCG.

WCG just needs a quarterly evaluation to see if everything goes according to my long term estimates, I'll keep holding WCG.

The inclusion in the S&P MidCap 400 index has increased volume on WCG, which is a positive. I wonder when will WCG be added to the S&P 500 :)

I'll keep holding WCG.

Next week David as I heard  :)

Quote from: Garoh on March 22, 2007, 09:15:34 AM
Next week David as I heard  :)

That would be nice Garoh, but I believe it will take more than that, since WCG is now a $3.63 B market cap and the last new constituent of the S&P 500 was a $7.93 B market cap company.

Perhaps when WCG reaches $200 :)

Huge volume today as the stock closed at a new all time high. I'll keep holding WCG.

Analysts have been busy raising EPS estimates for WCG:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=34790;image)

Now they're expecting EPS of $4.17 for the full year of 2007, which represents a 17.8% increase from the $3.54 reported in 2006. I believe these estimates will rise even more as time goes by and I'll keep holding WCG.

Nothing new on WCG today, perhaps it will come down a bit to close the gap opened between $86.98 and $87.5, since that gap originated from a "no fundamental development" type of news, which was:

• Standard & Poor's Announces Changes to U.S. Indices (http://biz.yahoo.com/prnews/070316/nyf119.html?.v=6)
PR Newswire (Fri, Mar 16)

I'll continue holding WCG.

QuoteNothing new on WCG today, perhaps it will come down a bit to close the gap opened between $86.98 and $87.5, since that gap originated from a "no fundamental development" type of news, which was:

• Standard & Poor's Announces Changes to U.S. Indices (http://biz.yahoo.com/prnews/070316/nyf119.html?.v=6)
PR Newswire (Fri, Mar 16)

It did close that gap, technically ready to move back up now. I'll keep holding WCG.

WCG fell 1.29% yesterday, in tandem with the general market. I heard someone of the Congress say, and the FED chief confirmed it, that in 10 years the health care services industry will be 20% of the US economy :o

The US economy is "worth" about $13 T now, if it grows at an average annual pace of 2.5% it will be a $16.6 T economy in 2017, so 20% of this is $3.33 T.

WCG, also from what you can read on previous analysis in this thread, has the potential to be a $100 B plus market cap company. It is $3.55 B now. I'll keep holding WCG.

I'm not going to fall into the trap of trying to read too much out of today's movement. WCG went down because it was up a lot over the previous months. It is now approaching the support given by the ascending trendline and the 50 days SMA.

I'll continue holding WCG for the long term.

As you can see on the table below, WCG's fundamental improvement is outstanding, with revenues growing 18% a quarter and gross margin more than doubling in five quarters:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=35001;image)

I see this rapid growth continuing for years to come and I'll keep holding WCG.

WCG's revenues grew every quarter since inception:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=35073;image)

It doesn't get much more reliable than this. And growth has been very strong, at 11.6% a quarter, on average :o

I'll keep holding WCG.

Today, instead of revenues in absolute terms, I want to know about the Rate of change of revenues, sequentially on a quarterly basis:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=35127;image)

Revenues are growing at a 11.6% average quarterly rate, but that growth accelerated in 2006, with 42.7% growth in Q1 2006, 16.2% in Q2 (from Q1 level, please note that), 15% in Q3 and 15.1% in Q4.

This makes WCG one of the fastest growers of the Main Portfolio (http://www.3stocksonfire.org/images/2007_botao_main_portfolio_forum.gif), with a 98% revenue jump in 2006 (only beaten by GIGM with 113% growth).

I'll keep holding WCG.

WCG is still playing around the $90 resistance level, but fundamentals say the stock is worth a lot more than that, so it's just a matter of when, not if, the stock pushes towards $100. Anyway, I would like to apply my new valuation model to WCG to know what would the optimal selling price be, given the current fundamental trends. I'll do that over the weekend, I have to be quick making these updates now so I can complete the 10 page course in fundamental analysis faster.

I'll keep holding WCG.

QuoteI would like to apply my new valuation model to WCG to know what would the optimal selling price be, given the current fundamental trends. I'll do that over the weekend ...

To get reasonable estimates to the four variables of the valuation model, I need to study four graphs with basic fundamental information. Today I'll design the first graph for WCG, which is the "Share Count & Market Cap evolution":

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=35237;image)

As we can see, the share count compound annual growth rate (CAGR), has been 2% since the company's IPO in 2004. So, 1.02 seems like a reasonable estimate for our first working variable, the "dilution factor".

But, to get to this estimate I also like to study the balance sheet, to see if the short term liquidity picture is healthy (I'm sure it is), not showing the need for private placements and stuff like that. We'll do that over the next update.

In the meantime, I'll keep holding WCG.

Hi David,

  If you don't mind, could I ask you the source/service you use to get the historical share count information? Your valuation approach is excellent!

Quote from: Dory99 on April 06, 2007, 10:54:04 AM
Hi David,

  If you don't mind, could I ask you the source/service you use to get the historical share count information? Your valuation approach is excellent!

I use the following link Dory99: http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=wcg&lstStatement=10YearSummary&stmtView=Ann

Thanks :)

Thanks again, David.  :)

Quote from: Dory99 on April 06, 2007, 08:08:15 PM
Thanks again, David.  :)

You're welcome Dory99 :)

WCG finally closed above $90, at a new all time closing high.

I'm interested in studying WCG's balance sheet:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=35337;image)

Nothing special on this balance sheet, the cash pile will probably surpass $1 B in Q1 2007. I'll stay with the 1.02 dilution factor.

Tomorrow we'll study revenues and gross margin.

I'll keep holding WCG.

WCG's results will be out on May 8:

• WellCare Health Plans, Inc. Earnings Call scheduled for Tue, May 8 (http://biz.yahoo.com/cc/9/79499.html)
CCBN (Mon 5:10pm)

Until then we have time to set up the new valuation model perfectly and then make the necessary adjustments when the quarterly results become public.

I was going to study revenue trends for WCG today, but I'll leave it for tomorrow because I had other things to do (the 3 SOF Strategy Disclosed document has 14 pages instead of 10 :)) and I'm quite sleepy now. Don't wait up for today's updates, I'll write them before tomorrow's open.

See ya :)

This just came across my news service:

Link to original article:  http://www.tbo.com/news/money/MGB2EN12D0F.html

Published: Apr 11, 2007

TAMPA - Just as the Florida Legislature begins consideration of an 11.7-percent increase in Medicaid HMO rates, two leading Wall Street analysts have issued written warnings that the state's payments already are too high.

They say overpayments help explain the meteoric rise of WellCare Health Plans Inc., which has two Florida HMOs that account for about half of the state's Medicaid managed-care enrollment. Its $90-a-share stock price has doubled in the past year.

CIBC World Markets and Goldman, Sachs & Co. both say WellCare has been able to give state regulators the impression that its profits are slim by shifting money to a WellCare subsidiary in the Cayman Islands in the form of reinsurance premiums.

While legal, the analysts say, this WellCare arrangement masks the true picture of the plans' profits. As CIBC's Carl McDonald put it, "Florida appears to be overpaying its Medicaid plans, and it would seem to be only a matter of time before the state figures this out."

Goldman, Sachs and another firm, CCI Healthcare Partners, have teams examining the April 1 WellCare filings with state insurance commissioners in Florida and New York, trying to figure out what enables the Tampa-based company to be so much more profitable than its competitors.

"They're making tons of money," said Oliver Marti, a partner and portfolio manager at CCI, a Stamford, Conn., investment firm. "How does the government allow that?"

The answer, according to CIBC's McDonald and Matthew Borsch, vice president of Goldman, Sachs, is that WellCare is able to shift millions in profit to a sister company, Comprehensive Reinsurance Ltd., in the Cayman Islands.

WellCare's Florida plans sent $62.8 million to the Caymans company, which paid out $31.7 million, the filings show. Most managed-care plans have reinsurance margins of zero to 4 percent, Borsch said, but WellCare's was many orders of magnitude higher. The Florida plans would have reported earnings 66 percent higher than they did if they had kept reinsurance payments in line with the industry, Borsch said.

WellCare questioned both Borsch's motives and math.

"Analysts often sensationalize routine information to generate trading volume and profit," wrote spokeswoman Carol Cassara in the first of several e-mails to The Tampa Tribune in response to claims made by Borsch and others.

Not only is it legal for WellCare to conduct business with an affiliated company, she wrote, the arrangement was approved by Florida regulators in advance.

Jonathon Kees, spokesman for the Florida Office of Insurance Regulation, confirmed that an actuary there approved WellCare's Cayman reinsurance affiliate. Kees noted that his agency's main duty is to make sure insurers have sufficient assets to cover their risk.

The decision to seek the 11.7-percent rate hike for Medicaid HMOs came from Florida's Agency for Health Care Administration. Dyke Snipes, assistant deputy secretary for Medicaid finance with the AHCA, said the managed-care payments are pegged to the traditional Medicaid fee-for-service plan. Snipes said he found the suggestion that HMO payments were too generous "surprising" and said he'd have his staff study the Goldman, Sachs analysis.

Medicaid pays HMOs monthly payments to cover medical treatment for enrollees. If the plan spends more on a member, it loses money, and if it spends less, it makes a profit. Most Medicaid beneficiaries are healthy children, but the program has high costs for some disabled children and adults.

Florida Medicaid HMO payments, which vary by gender, age and geography, average $199.40 per member per month this year, Snipes said. If the AHCA budget passes as submitted, that rate will rise to $222.73.

WellCare set up its reinsurance arrangement with a trigger of $50,000. A member who has more medical costs than that will be taken over by Comprehensive Reinsurance Ltd.

Cassara, the WellCare spokeswoman, said the Goldman, Sachs report errs by applying Wall Street-style analysis to a Medicaid arena.

"The report uses aggregate data to make assumptions that are not reflective of our multiple lines of business," she wrote in an e-mail to the Tribune.

The company says its 2006 net income margin was only 3.7 percent, "lower than many of our competitors in the industry," Cassara wrote.

But Goldman, Sachs and CIBC World Markets say they calculate the company's income in double digits.

"The issue is that Florida relies primarily on data regarding cost-trend increases to determine rate increases, rather than profitability." McDonald wrote in his analysis for CIBC investors in March.

"Therefore, it will likely take some kind of external influence to convince the legislature in the state that Medicaid managed care payment rates could be a source of savings," McDonald said in the report.

The state doesn't take related entities into account in figuring the margins for Medicaid HMOs, but Wall Street analysts do. McDonald and Borsch used GAAP analysis - generally accepted accounting principles - to determine that Florida plans are making more profit than it appears and spending less on medical treatment: 81 cents of the premium dollar.

WellCare deals exclusively with government clients. About half of its members are Medicare beneficiaries in prescription drug plans. The beneficiaries are scattered across the nation. The other half are in state Medicaid plans.

In Florida, WellCare is by far the largest Medicaid plan, with more than 450,000 enrolled. AmeriGroup is second, with about 200,000. Of the $1.7 billion the state paid HMOs last year, WellCare's two plans took in half, almost $850 million.

Reporter Carol Gentry can be reached at (813) 259-7624.

Thanks for the very interesting article ravenquork, it didn't appear on my news service or in Yahoo. If we filter all the discussion, the current plan is to increase Medicaid HMO rates by 11.7%, which is great news for WCG. We'll see if those two analysts get away with their claims, but I don't think so, since WCG seems to be right when it says its profit margins are lower than the industry average:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=35475;image)

It is really weird to see Wall Street analysts complaining about excessive profitability, I wonder what their motivation is ::)

Let's move on with the study of the revenue trend:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=35474;image)

Given recent growth rates and the ones expected for the future, I believe it is reasonable to assume a revenue CAGR estimate of 1.3, I don't see why growth should decelerate as much as analysts predict, since in fact it has been accelerating over the past few quarters.

Tomorrow we'll study profitability, and I'm also curious about the adjustments to revenue that were in the order of $240 M in 2006. Are more profits hidden here? We'll check that out.

In the meantime, WCG looks very attractive, I'll continue holding the stock.

Interesting that this news comes out on the heels of the report in the Tampa Tribune, dated 4 days before the report.

On April 6, 2007, Imtiaz (MT) Sattaur notified the Registrant of his resignation as President, Florida effective immediately. Mr. Sattaur is departing to pursue other opportunities.

Quote from: ravenquork on April 12, 2007, 11:26:19 AM
Interesting that this news comes out on the heels of the report in the Tampa Tribune, dated 4 days before the report.

On April 6, 2007, Imtiaz (MT) Sattaur notified the Registrant of his resignation as President, Florida effective immediately. Mr. Sattaur is departing to pursue other opportunities.

Yes ravenquork, people yesterday speculated that the facts were related, but I don't think this has a material impact on the fundamental trends of the company, and that's what drives the stock price over the medium to long term.

Today I'm not able to study the profitability of WCG or what those adjustments to revenue mean (I have to leave in a few minutes to take care of personal bureaucracy), but tomorrow I'll do that study (and there's plenty of evidence in this thread about the attractiveness of WCG as a long term investment).

In the meantime I'll keep holding WCG, as the stock yesterday touched its ascending support trendline and recovered some ground with volume above average:

Quote from: David Randolph on April 12, 2007, 04:08:27 AM
Thanks for the very interesting article ravenquork, it didn't appear on my news service or in Yahoo. If we filter all the discussion, the current plan is to increase Medicaid HMO rates by 11.7%, which is great news for WCG. We'll see if those two analysts get away with their claims, but I don't think so, since WCG seems to be right when it says its profit margins are lower than the industry average:

It is really weird to see Wall Street analysts complaining about excessive profitability, I wonder what their motivation is ::)

Let's move on with the study of the revenue trend:

Given recent growth rates and the ones expected for the future, I believe it is reasonable to assume a revenue CAGR estimate of 1.3, I don't see why growth should decelerate as much as analysts predict, since in fact it has been accelerating over the past few quarters.

Tomorrow we'll study profitability, and I'm also curious about the adjustments to revenue that were in the order of $240 M in 2006. Are more profits hidden here? We'll check that out.

In the meantime, WCG looks very attractive, I'll continue holding the stock.

In your report, you show over all ttm operating margins for WCG at 6.47% vs 7.87%  for the industry. On the face of it it looks like WCG has a low operating margin, therefore, it is likely the rate increase in Florida to go through.
While the table is very helpful, It does not reflect the fact that reimbursement rates are set by each individual state. In my mind, the better question to look at is a comparison of reimbursement rates for the top customer states.

I am not sure but I think Florida is one of the companies most profitable states. I don't think it is possible, due to the off shore transactions, but it would be good to know the operating margin for Florida compared to the other top states. 
My concerns are that-

Florida's margins might actually be relatively higher, off setting lower margins in other states. In that case, Florida may not grant the rate hike. This could , depending on margins in other states and their percentage contribution to the bottom line, could impact future margins in a disproportion manner.

Given the potential for, and unpredictability of political influences on rate decisions, if WCG is hurt in Florida, other States would most likely look to adjust reimbursement rates downward.

Since the questions I pose seem to be unanswerable, predicting stock valuations becomes somewhat more guess work and a little less analysis.  It does, in my mind, create a higher level of risk that needs to be factored in.

QuoteToday I'm not able to study the profitability of WCG or what those adjustments to revenue mean (I have to leave in a few minutes to take care of personal bureaucracy), but tomorrow I'll do that study (and there's plenty of evidence in this thread about the attractiveness of WCG as a long term investment).

I agree that there is plenty of historical evidence for this stock to be a great investment, but there are unquantifiable, but real and significant threats that could impact share price.

Bye the way, I do own the stock, but with weaker hands than most of my other holdings.

QuoteI am not sure but I think Florida is one of the companies most profitable states. I don't think it is possible, due to the off shore transactions, but it would be good to know the operating margin for Florida compared to the other top states.

Unfortunately the company doesn't breakdown and disclose this type of information :(

QuoteFlorida's margins might actually be relatively higher, off setting lower margins in other states. In that case, Florida may not grant the rate hike. This could , depending on margins in other states and their percentage contribution to the bottom line, could impact future margins in a disproportion manner.

Given the potential for, and unpredictability of political influences on rate decisions, if WCG is hurt in Florida, other States would most likely look to adjust reimbursement rates downward.

But, what seems to be in discussion is a rate hike of 11%, nobody is talking about lowering reimbursement rates for Medicaid or Medicare in Florida. Anyway, WCG's growth isn't coming from Florida, in fact, its presence there is shrinking, at least in the number of subscribers (which is the only information that is broken down state by state):

«During 2006, our overall membership in Florida decreased from approximately 545,000 members to approximately 525,000 members.»

QuoteSince the questions I pose seem to be unanswerable, predicting stock valuations becomes somewhat more guess work and a little less analysis.  It does, in my mind, create a higher level of risk that needs to be factored in.

I agree that there is plenty of historical evidence for this stock to be a great investment, but there are unquantifiable, but real and significant threats that could impact share price.

I agree, the risks you mention exist. But, the issue on the table now is: "will net profit margin in Florida increase or stay more or less the same?"

Let's take a look at the quarterly EPS growth:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=35624;image)

The compound quarterly growth rate, between Q1 2006 and Q4 2006, is 35%. If this growth rate continues in 2007, we'll get the following quarterly EPS numbers:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=35625;image)

If this happens and WCG trades at the Health Care Plans industry average earnings multiple of 18.3 (http://finance.yahoo.com/q/co?s=WCG), WCG will be a $234.42 stock by the start of 2008.

Perhaps I'm being too optimistic, expecting the 2006 growth rate to be maintained, but who knows? At least this is the current fundamental trend, and that's what we have to believe.

I also couldn't figure out why the adjustments to revenue, but if the difference is some kind of hidden profit, again, the stock would go higher.

I believe there's enough growth potential here to put risks aside and keep on holding WCG as a long term investment. That's what I'll keep on doing.

Quote from: David Randolph on April 15, 2007, 06:26:16 PM

But, what seems to be in discussion is a rate hike of 11%, nobody is talking about lowering reimbursement rates for Medicaid or Medicare in Florida. Anyway, WCG's growth isn't coming from Florida, in fact, its presence there is shrinking, at least in the number of subscribers (which is the only information that is broken down state by state):

«During 2006, our overall membership in Florida decreased from approximately 545,000 members to approximately 525,000 members.»

I believe there's enough growth potential here to put risks aside and keep on holding WCG as a long term investment. That's what I'll keep on doing.

Another Florida paper published an article concerning private Medicare plans tittled: 

U.S. pays big bucks to private Medicare
Seniors like the lower costs, but some health officials say the plans can't last much longer.

Link to article ( only active for two weeks) : http://www.orlandosentinel.com/orl-medicare1507apr15,0,4282518.story?page=2&track=mostemailedlink

David, excellent work on the portfolio! Lower stress, less time and good performance, what more could an investor want?  ;D

Thanks for the interesting and informative article ravenquork, please keep them coming :)

Today let's study the 3rd variable we need to derive WCG's valuation model, the net profit margin:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=35655;image)

My net profit margin for 2007 leads me to higher than average EPS estimates. For example, for 2007, analysts are expecting EPS of $4.17, but, if the company maintains the 4Q 2006 net profit margin of 5.21%, according to the same analyst's revenue estimate of $4.88 B and 3% dilution in 2007 (in fact I just saw I've estimated 1.02 as the dilution factor in previous updates), EPS will come in at $5.21 against just $4.17 expected by analysts on average:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=35656;image)

Given the information I get from this thread, the valuation model looks like this:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=35657;image)

Well, WCG's results are worse than I expected, there isn't much inefficiency here. Anyway, the expected share price CAGR is still higher than 16%, at 21.9%, and the optimal selling price is just $104.62, so lacking a better idea for now, I'll keep on holding WCG.

QuoteDavid, excellent work on the portfolio! Lower stress, less time and good performance, what more could an investor want? ;D

Thanks for your kind words Ravenquork :)

Today WCG traded at a new all time intraday high but closed just shy of it. I'll follow my fundamental model indications and keep on holding WCG until the optimal selling price of $104.40 is reached:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=35727;image)

WCG closed at a new all time high today. Now we have the valuation model always updated on the Main Portfolio (http://www.3stocksonfire.org/3stocksonfire.php) page:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=35789;image)

WCG is the stock with less potential in the Main Portfolio, but probably also the safest investment. We still have 15% to go for me to sell the stock, if there's no new fundamental information.

I'll keep holding WCG.

Nothing new on WCG today, results will be out on May 7. I'll keep holding the stock.

WCG closed at a new all time high today, at $91.64. The stock seems decided to move towards $100, but probably that won't happen before 1st quarter results are known. The company will release them at May 7:

• WellCare to Release First Quarter 2007 Results on May 7 (http://biz.yahoo.com/bw/070409/20070409005592.html?.v=1)
Business Wire (Mon, Apr 9)

Analysts are already expecting this to be the weakest quarter of the year, so probably there's room for a positive surprise:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=35910;image)

In Q4 2006 WCG had EPS of $1.4, and analysts are expecting just $0.54 for Q1 2007. Yes, there's seasonality, but this is too much, and for example, in Q1 2006 EPS was $0.42 compared to $0.27 in Q4 2005.

My valuation model says WCG is still attractive at current levels, expected to return 21.4% a year going forward:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=35911;image)

We'll probably get a chance to take profits at the optimal selling price of $105.08 after the Q1 earnings release (unless earnings are so good they'll make me raise my estimates).

I'll keep holding WCG.

 Here is editorial in the NY Times about Medicare subsidies.

Editorial
The Medicare Privatization Scam
     
Published: April 21, 2007

http://www.nytimes.com/2007/04/21/opinion/21sat1.html?th&emc=th

"... When the Democrats first won control of Congress, it seemed possible that they might eliminate the subsidies — saving some $54 billion over five years — to finance a $50 billion expansion of a health insurance program for low-income children. But the insurance industry has mounted a furious lobbying campaign to head off any cuts.

Congress ought to eliminate the subsidies completely unless it is willing to subsidize the same benefits — at enormous cost — for the far greater number of people enrolled in standard Medicare. It is time to level the playing field and force private plans to really compete with traditional Medicare."

I find it a bit strange that we would first have 2 Wall Street Analysts complaining about profits, then three articles (probably more - these are just the ones that popped up) complaining about the the government subsidies of private Medicare providers.

Yes ravenquork, it is interesting how people are saying and writing bearish things about the Health Care Plans industry and WCG keeps on going up to new all time highs with volume above average. When words say down and money says up I always prefer to follow what the money is saying.

I have some hope of being able to revise my long term estimates upward for WCG, but for now my valuation model looks like this:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=36009;image)

It says WCG will return 20.84% over the next three years, and that means I shall take profits at the optimal selling price of $105.08 (at that price the stock will start returning less than 16%).

My main hope is that my revenue CAGR estimate is too low, at just 30%, since revenue in 2006 grew 98%. Analysts are expecting just 38.5% revenue growth for 2007, but maybe they're way too conservative. We'll get some more clues to solve this issue when the company reports Q1 2007 results on May 7.

I'll continue holding WCG.

WCG closed at a new all time yesterday. Results will be out on May 7. You can check the valuation model results here (http://www.3stocksonfire.org/fundamental.model.php?ticker=WCG&portfolio=main) (the optimal selling price rose a bit to $105.88 due to a multiple expansion in the Health Care Plans industry average).

I'll continue holding WCG.

WCG had a day of profit taking, as it went down 0.94%. The technical trend remains bullish and fundamentals are attractive. I hope I'll be able to raise my estimates (http://www.3stocksonfire.org/fundamental.model.php?ticker=WCG&portfolio=main) when the company reports Q1 results on May 7.

I'll keep holding WCG.

Time to sell, earnings growth will slow going forward, good short

Quote from: yukiii on April 25, 2007, 06:13:43 PM
Time to sell, earnings growth will slow going forward, good short

yukiii,

It is easy to make pronouncements, but what is your rational?

Quote from: ravenquork on April 25, 2007, 06:58:29 PM

Quote from: yukiii on April 25, 2007, 06:13:43 PM
Time to sell, earnings growth will slow going forward, good short

yukiii,

It is easy to make pronouncements, but what is your rational?

I already said why..........
Time to sell, earnings growth will slow going forward, good short overvalued, But what do i know?

Read between the lines

Quote from: yukiii on April 25, 2007, 07:36:07 PM

Quote from: ravenquork on April 25, 2007, 06:58:29 PM

Quote from: yukiii on April 25, 2007, 06:13:43 PM
Time to sell, earnings growth will slow going forward, good short

yukiii,

It is easy to make pronouncements, but what is your rational?

I already said why..........
Time to sell, earnings growth will slow going forward, good short overvalued, But what do i know?

Read between the lines

No you didn't!! I checked all pages of this thread and the only thing you posted were some updated 'short numbers'.
Every child can say this stock wil go down/up but this isn't a yahoo board! You almost never back up your opinion with some facts or a simple explanation why you see it this or that way!  >:( ::)

Look at there guidance, Growth will slow, I can't state it any easier then that.
It was a nice run up to the $90

Quote from: yukiii on April 26, 2007, 01:39:10 PM
Look at there guidance, Growth will slow, I can't state it any easier then that.
It was a nice run up to the $90

No doubt growth will slow. Revenue growth was 33.5% in 2004, 34.7% in 2005 and 97.9% in 2006. I expect just 30% revenue growth for the next 3 years, so "slower growth" is already factored in my valuation model:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=36208;image)

I expect 2% dilution, 30% revenue growth, 5% net profit margin and a 18.47 earnings multiple. Given these estimates, the valuation model tells me I should take profits in WCG at $105.36.

I'll continue holding WCG.

I would adjust earnings growth to 20% next 3 years
3.41 2006  4.00 2007  4.50 2008

Quote from: yukiii on April 26, 2007, 05:59:38 PM
I would adjust earnings growth to 20% next 3 years
3.41 2006  4.00 2007  4.50 2008

The company's internal guidance is superior to your expectations:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=36216;image)

And WCG has been beating analysts estimates every quarter:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=36217;image)

You can be right, but you can't substantiate your expectations on any trend or public indication. Or can you? Thanks :)

Quote from: David Randolph on April 26, 2007, 06:24:20 PM

Quote from: yukiii on April 26, 2007, 05:59:38 PM
I would adjust earnings growth to 20% next 3 years
3.41 2006  4.00 2007  4.50 2008

The company's internal guidance is superior to your expectations:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=36216;image)

And WCG has been beating analysts estimates every quarter:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=36217;image)

You can be right, but you can't substantiate your expectations on any trend or public indication. Or can you? Thanks :)

I believe you just  substantiate it for me with your figures above. You stated company guidance is 4.17 for 2007  that's less then 20% growth going forward.

I believe this expectation is fully realized at the price of $90 and there are more attractive opportunities for upside elsewhere in the managed care sector.

Organic growth in the Medicaid program is slowing with a lack of market expansion.

QuoteI believe you just  substantiate it for me with your figures above. You stated company guidance is 4.17 for 2007  that's less then 20% growth going forward.

I would read "between $4.10 and $4.20" as $4.15, not $4.17. Since 2006 fully diluted EPS was $3.43, growth would then be 20.99%, to be precise.

QuoteI believe this expectation is fully realized at the price of $90 and there are more attractive opportunities for upside elsewhere in the managed care sector.

Yes, probably there are more attractive opportunities in this sector, since WCG is the least attractive stock in the Main Portfolio (http://www.3stocksonfire.org/3stocksonfire.php). Any suggestions? Thanks.

Ok, I couldn't find anything worth buying in healthcare but did find IDSA in waste management

Reported preliminary results for Q1 of $0.22 vs $0.12 in same quarter last year. Could make close to $0.90 this year.

ROCM would of been a good pick about 15 PPS... It now stands @ 29

Another article in the Tampa Tribune regarding WCG

WellCare's Money Transfer Investigated By State CFO
Skip directly to the full story.

By CAROL GENTRY The Tampa Tribune

Published: Apr 27, 2007

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TAMPA - Florida's chief financial officer, Alex Sink, is reviewing ties between WellCare Health Plans' Medicaid HMOs in Florida and a WellCare subsidiary in the Cayman Islands, her office confirmed on Thursday.

Sink's review began after the relationship among the companies was described April 11 in The Tampa Tribune, said her spokeswoman, Nina Banister. Sink released a written statement to the Tribune turning down a request for an interview on the matter until she has time to review the report and allegations.

Marc Ryan, vice president of policy at Tampa-based WellCare, said that when Sink completes her review she will find that there were no overpayments to the affiliate.

"If you look at the Medicaid premiums paid by WellCare Florida to the reinsurer for 2006, the claim recoveries equal the payments," Ryan said.

It is not illegal to use an affiliated reinsurance company, which provides stop-loss coverage. And other insurers have affiliates in the Cayman Islands.

The company submitted the request to start the reinsurance company to the Office of Insurance Regulation after an independent actuary determined the appropriate rates, WellCare's Ryan said.

Actuary Nathan Tan, with the regulatory office, reviewed the request and determined there was nothing wrong with it, spokesman Jonathon Kees said. He said he doesn't know who in the office ultimately signed off on it.

The CFO's review of the WellCare arrangement comes a week after Sink rebuked Insurance Commissioner Kevin McCarty for sponsoring a fundraiser for a friend's campaign, requesting contributions from the insurance industry. McCarty spokesman Bob Lotane, whose wife was the candidate, resigned after disclosures that he had used a state-owned computer to work on the invitation.

McCarty apologized, and Gov. Charlie Crist said this week that he supports the commissioner. Crist said the industry could be trying to darken McCarty's reputation because he is a strong advocate for consumers.

The April 11 Tribune story quoted three Wall Street analysts who said WellCare's Florida HMOs sent far more money than necessary to the unregulated subsidiary, Comprehensive Reinsurance Ltd. The WellCare HMOs sent $73 million and recovered $38 million, a difference of $35 million.

The analysts said that because the shift made no difference in the overall company income, they speculated the move was meant to keep WellCare's margins slim before the Legislature debated the Medicaid managed-care rate increase for next year. The debate is going on now.

Ryan noted that the analysts erred by lumping the Medicaid and Medicare premiums together. Only $19 million of the shift was for Medicaid because the risk for Medicare beneficiaries was much greater. After end-of-year claims came in, the claim recoveries for Medicaid patients equaled $19 million, he said.

The Medicare premiums and recoveries also matched up, he said. The confusion may have arisen because the reinsurer was created in late 2005. "It's a new entity," he said.

In Florida, WellCare is by far the largest Medicaid plan, with more than 450,000 enrolled. Of the $1.7 billion the state paid HMOs last year, WellCare's two plans took in half, almost $850 million.

WellCare operated Medicaid plans in seven states last year, and Florida was its main market. The Florida Medicaid program provided about one-third of the company's total premium revenue, according to WellCare's year-end report to the Securities and Exchange Commission.

Wall Street researchers have been speculating for months over WellCare's astonishing growth in enrollment and stock value. That led three firms to plow through the company's April 1 Florida filings and discuss their conclusions.

All three concluded that the state was overpaying its Medicaid HMOs and warned about political backlash that could adversely affect WellCare, AmeriGroup and other publicly traded companies that have Medicaid contracts in the state.

http://www.tbo.com/news/money/MGBF2Z8XZ0F.html

Quote from: yukiii on April 26, 2007, 11:10:23 PM
Ok, I couldn't find anything worth buying in healthcare but did find IDSA in waste management

Reported preliminary results for Q1 of $0.22 vs $0.12 in same quarter last year. Could make close to $0.90 this year.

IDSA Up 24% today

Thanks a lot for that article ravenquork, it partially explains why WCG went down 3.94% on Friday. Now I'm just a bit in the green with this position, and it is the least attractive stock in the Main Portfolio (http://www.3stocksonfire.org/3stocksonfire.php).

I get somewhat worried that this company needs to "hide" its net profit margin or else politicians may cut the reimbursement rates it gets for its services. The company's profitability may grow, but not due to an expansion in net profit margin.

Given this I should probably cut my final net profit margin from 5% to 3.5%, which seems to be the politically "acceptable" net profit margin:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=36312;image)

Just a 1.5 percentage point cut in the final net profit margin changes the valuation model results dramatically. This also happens because the stock was just barely attractive. I still think WCG will continue to rise over the long term, but probably not at satisfactory rates for the Main Portfolio (http://www.3stocksonfire.org/3stocksonfire.php).

Since the stock also broke an important ascending trendline in the technical chart, I decide to sell my WCG shares at Monday's open.

Quote from: David Randolph on April 29, 2007, 05:20:50 AM
Thanks a lot for that article ravenquork, it partially explains why WCG went down 3.94% on Friday. Now I'm just a bit in the green with this position, and it is the least attractive stock in the Main Portfolio (http://www.3stocksonfire.org/3stocksonfire.php).

I get somewhat worried that this company needs to "hide" its net profit margin or else politicians may cut the reimbursement rates it gets for its services. The company's profitability may grow, but not due to an expansion in net profit margin.

Given this I should probably cut my final net profit margin from 5% to 3.5%, which seems to be the politically "acceptable" net profit margin:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=36312;image)

Just a 1.5 percentage point cut in the final net profit margin changes the valuation model results dramatically. This also happens because the stock was just barely attractive. I still think WCG will continue to rise over the long term, but probably not at satisfactory rates for the Main Portfolio (http://www.3stocksonfire.org/3stocksonfire.php).

Since the stock also broke an important ascending trendline in the technical chart, I decide to sell my WCG shares at Monday's open.

The company's internal guidance is superior to your expectations:

And WCG has been beating analysts estimates every quarter:

You can be right, but you can't substantiate your expectations on any trend or public indication. Or can you? Thanks
[/quote]

What happen nothing changed from last week? You said you would hold to $110.

QuoteWhat happen nothing changed from last week? You said you would hold to $110.

I said $105, not $110. Essentially three things made me change my mind:

1) Your warning about growth and the fact that the company's own guidance points to just 21% EPS growth in Q1 2007 when compared to Q1 2006. I had 30% growth in my valuation model;

2) The articles ravenquork posted clearly showing WCG depends more on political lobbying than normal market demand/supply forces, and I dislike businesses that depend too much on politics. The fact that political pressure won't let WCG have a fat net profit margin lead me to lower my long term net profit margin forecast from 5% to 3.5% and that made the stock unattractive according to my valuation model;

3) The stock broke down technically, on volume above average.

I change my mind whenever I feel it is appropriate to do so. Hey, sometimes I agree with you and on other times I disagree with you, you can't argue with me on both occasions ;D

If you like volatility, here's your play for the morning.  Earnings and possibly some clarification on the gravity of their situation.

WCG looked like a stock widows and orphans should own for the long term (I wonder if elliemae still has it and what she thinks of the current situation), but it seems several politicians were angry at the company's profits. This was actually part of my reasoning for selling the stock:

Quote2) The articles ravenquork posted clearly showing WCG depends more on political lobbying than normal market demand/supply forces, and I dislike businesses that depend too much on politics. The fact that political pressure won't let WCG have a fat net profit margin lead me to lower my long term net profit margin forecast from 5% to 3.5% and that made the stock unattractive according to my valuation model;

The stock is currently trading at 7.2 times 2007 earnings estimates (http://finance.yahoo.com/q/ae?s=WCG), which incorporates the risk ... well, the risk is total failure and bankruptcy, I guess. The upside is maybe 100%, since after this FBI investigation WCG will always carry a lower than average valuation. It takes a long time to build credibility and confidence among investors and when that's lost ... it may take many years to regain it.

So, considering the upside potential is about a double and the risk is a complete loss of capital, I find WCG unattractive at this point. But will keep an eye on developments.

The Fed's raid killed WCG for good.

Oppenheimer put out a 20 pages research piece for WCG yesterday.

Here are the conclusions:

Valuation

Our 12- to 18-month price target is $60.

Price Target Calculation

Our price target of $60 is derived from a P/E multiple valuation methodology. WCG is currently trading at 7.4x our 2008 EPS projection of $5.40, a major discount to its peer group, reflecting the uncertainty of the company's legal overhang after an FBI raid in October 2007. Our price target represents a multiple of 11.1x our 2008 EPS projection. Our target multiple for WellCare is a modest discount relative to the target multiples we have assumed for other companies in the group, given the uncertain news flow that will impact the company's share price as the investigation progresses.

Risk Factors

The major risk to our price target is the emergence of documents or evidence that WellCare engaged in systematic, widespread fraud in its business. If this occurs, it increases the likelihood that WellCare is stripped of one or more of its government contracts, and raises the possibility that the company will be put out of business. Other risks to our price target include WellCare's relatively high level of profitability in the Florida Medicaid business, high concentration of membership in Florida; an unexpected increase in medical cost trends; budget deficit issues that result in Medicaid funding cuts; actions by Congress to reduce Medicare reimbursement, particularly in the Medicare private fee for service program. We expect WellCare to lose Medicare membership next year, but the legal situation could make our forecast aggressive. Money flows out of the managed care sector remain a concern, particularly in an election year.