WellCare: Pariah to Bargain? - 500 Beiträge pro Seite

[srleonard]

WellCare: Pariah to Bargain?
By GREGORY ZUCKERMAN, HEATHER WON TESORIERO and JOSEPH CHECKLER
November 6, 2007; Page C6

After steep losses this summer, hedge funds reworked their strategies to avoid aping one another's investments, right?

Maybe not.

The sudden collapse of WellCare Health Plans Inc.'s stock price amid a government investigation caught some of the largest, most-successful quantitative funds owning the same stock. Many of WellCare's large investors dumped the stock, pushing it even lower.
[WellCare]

Now, as details of the inquiry emerge, some say the hedge-fund selling may have created an opportunity for investors with an appetite for risk. Yesterday, WellCare's share price rose 22% to $33.30 at 4 p.m. in composite trading on the New York Stock Exchange after the company said third-quarter net income climbed 67%. The stock remains well off recent highs, however.

On word that state and federal agents descended on WellCare's Tampa, Fla., headquarters Oct. 24, the company's stock price declined from $128 a share the day before to less than $21 in about a week. A number of hedge funds using computer-based, quantitative models appeared to be among the biggest losers. So-called quant funds often target stocks that look cheap, based on various measures, and bet against overpriced shares.

WellCare's stock tumbled more than 60% in a few hours last month. The rash of selling suggests that the same models that pushed the quant hedge funds to scoop up shares began urging them to sell when the stock fell, even though it isn't clear how the investigation will affect the company.

At the end of the second quarter (the latest securities filings available), James Simons's Renaissance Technologies Corp. was the largest holder of WellCare, owning more than 8% of the company's shares. Renaissance bought 1.1 million shares during the second quarter. If it still held its 3.5 million shares at the time of the raid, the value of Renaissance's stake dropped to less than $100 million from more than $400 million in a one-week period. Renaissance declined to comment.

Other leading quant firms, such as D.E. Shaw & Co., AQR Capital Management Inc. and Two Sigma Investments Inc., were among significant investors in WellCare. People close to the matter say some of these companies remained big holders as the investigation was launched. Other investors who specialize in quant trading also were WellCare fans. By some analysts' estimates, quantitative funds controlled 40% of the shares before the price drop.

Some funds, such as Caxton Associates and Symphony Asset Management, sold some of their WellCare shares during the second quarter, according to filings.

WellCare's hefty profit margins were among the reasons computer models lit up, according to someone close to one of the funds. Brian Wright, an analyst at Jefferies & Co., says quantitative firms were so heavily invested in WellCare also because of the company's recent tendency to beat analysts' earnings targets, then raising guidance.

Those same attributes, however, worried investors who don't depend on computer models. In the spring, several Wall Street analysts expressed concern. Carl McDonald, an analyst at CIBC World Markets, questioned the amount of money WellCare was getting from the state of Florida compared with competitors. He has an "outperform" rating on the shares.

"People have always had some concerns about WellCare; they have higher margins than others in the sector," said Peter Costa, a managed-care analyst with researcher FTN Midwest Securities Corp. Friday, Mr. Costa upgraded his rating on the stock to the equivalent of "hold" from "sell."

Only Friday did it emerge that the investigation was spurred, at least in part, by allegations that WellCare inflated the amount it spent on mental-health care. The alleged goal was to keep money it should have refunded to Florida's Medicaid program, according to a person familiar with details of the investigation. WellCare's practices allegedly defrauded the state/federal health-care program of more than $35 million over five years, this person said. The company hasn't been charged with wrongdoing.

WellCare is delaying filing its financial report for the third quarter, although it released preliminary results yesterday.

WellCare, which provides managed-care plans for 2.3 million Medicare and Medicaid participants, has said it is cooperating with investigators and doesn't expect its business to be disrupted by the inquiry.

[srleonard]

Antwort auf Beitrag Nr.: 32.349.393 von srleonard am 08.11.07 21:07:45

geiler chart, keine empfehlung vom frick, auch wenn es so aussieht