WellCare Health Plans, Inc. (WCG)

Possible benefit from Obamacare

$6.8B Sales trading for cash on hand. Although legal matters scare me, I think that the market has oversold this stub.

EMA Cross

Currently trading hands at a ludicrously low single digit multiple to FCF, Wellcare is providing investors with nothing short of an incredible opportunity to earn a double or more with relatively low risk over the next year or so.

As Bruce Berkowitz said recently in the latest OID, "Once WellCare concludes its legal issues -- and the settlement reserves and outrageous legal and accounting bills stop -- their true earnings power will become apparent." I agree. Wellcare's ability to generate cash over the next few years and beyond is being obscured by a number of temporary issues/concerns (both company and industry specific), none of which permanently impair their franchise. The bottom line is that this company is just way to cheap relative to its long term earnings power. Outperform.

Wellcare has recently filed all of its late financial statements and is in compliance with listing rules. Fairholme owns its debt maturing in May, so they won't have a problem refinancing it (Fairholme also owns 20% of the equity). This company has earning power of $5 per share. If you assume the government will squeeze their margins, and earnings drop by half, you're still buying it at 5x earnings today. So it's a compelling buy no matter what; nobody else can do Medicare/Medicaid if not for these specialized HMOs.

cash machine, buy with every penny u have

combination of market downturn and the feds

Defensive based on z-score table here:

http://www.thestreet.com/story/10446139/3/balance-sheets-101-who-might-survive-this-crisis.html

Fairholme, tracking

I don’t think there is an underwriting cycle in managed care anymore. The speed of claims processing has improved dramatically, and plans know a lot earlier in the year when a product has been mis-priced. A little over a year ago, this was a "darling" stock with revs and profits growing at 30-40% per annum. An FBI raid last year resulted in huge question marks relating to potential fraud. It appears that the malfeasance related to a mental health reimbursement issue in FL rather than being widespread. Company was ordered to pay $35 million and may face additional damages which could reach $75 to $100 million. Zero exposure to AIG, WM, FNM or FRE paper.Recently won a Medicaid contract in Hawaii despite the investigational "taint."
With WCG's historical massive Medicare enrollment growth, a significant amount of capital is tied up in a subsidiary. As enrollment growth slows, which it inevitably will, this should free up capital that could be moved upstream to the parent to buy back stock or make acquisitions. This could well be a takeover target itself.

In Pabrai and Berkowitz I trust.

aFTER ELECTION CYCLE ALL WILL BE ON TABLE IN NAT HEALTH CARE DEBATE AND REFORM AND THEY ARE WELL POSITIONED AT LOCALE AND STAT LEVELS THROUGH OUT COUNTRY ESPECIALLY BY MEANS OF THE AND BACKING OF THE SOROSS CONNECTIONS AND GROUP THEIR CONTACTS AND CONTRACT SIGNED AND PENDING...

This is a contrarian pick and I think healthcare will do well in the midst of a weak U.S. economy. I see little downside to this stock from here, with a lot more upside potential.

The value of this company did not drop 80%

Reasonable bet that this stock will outperform in the long term.

With Pabrai and Berkowitz of Fairholme on board, I'm also a believer that the hit this company took following the news of an investigation was a bit exaggerated. It should emerge fundamentally unscathed.

mp

I am amazed at everything I am reading. I bought Wellcare at its near low of $25 a share and sold at $49 (a price I was delighted with!). Since then thuogh the industry has had a dip, that is based on more than just rumour - the fundamentals behind medical costs are very real. We know little about Wellcare except for:

- the stock has benefitted from rumours of a takeover. However at a P/E premium to the industry's bigger players and an uncertain future, I doubt very much that the big players of UNH and HUM will entertain a takeover right now.

- the company has axed 5% of its workforce and announced a Q1 loss is likely. True some of that is related to legal fees but most of it (as evidenced by the job chops) is the result of fundamentals. We do not yet know 2007 EPS but I will bet in the current environment 2008 EPS will be lower than 2007's.

- Based on the above there is a large PE premium to which the stock is trading against its peers. And in case everyone else forgot- THE INVESTIGATION IS ONGOING - and close to an election!!!! You do not spend $32m on legal fees if the likely outcome is a $100m fine! I think this is big! I would also add the job cuts are not at the best time as having disgruntled former sales staff provide evidence will be of no help.

WHEN THIS DROPS, IT WILL DROP BIG!!!

Health care is stable and this company is undervalued. With solid fundamentals and a scandal no longer an issue this thing is ready to blast off.