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Profiting from Human(a) Disasters
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Today I established a position in Humana after it took less than 24 hours to go from $62.80 to around $34. I know the story. Healthcare is immune to recession (but not to congress.) But, after a somewhat large management mistake in pricing, they reported they will have to reduce earnings for 2008. This comes less than a month after reporting good earnings and giving good forward guidance. Long term (2-3 years) this may be a buy and hold but I am suspicious of management that can make these types of mistakes and wipe out about 40% of the market cap in 2 days. I also have to account in the fact that this pricing error can be corrected next year and this is a good business to be in unless congress does something to undermine it. That won't happen for at least a few years as a new president will not likely get a Medicare reform bill passed in the few year or two of his or her (Wow! Never had to say that before) presidency, thus the 2-3 year time frame. But, markets love to overreact in both a positive and negative direction. I bought in today for a short term trade knowing it should get slight bounce today and will probably try to eek out a 5% gain before selling, maybe even as soon as today. Today's Fast Money Trade, EDIT: Got in at 42.50 and out at 45 in about an hour for about 6%. Just a quicky. | ||
