Einhorn's Greenlight Enters Obamacare-Battered Cigna (CI) and Coventry Health (CVH)
In his second quarter letter to Greenlight Capital clients, David Einhorn disclosed the fund has established several new positions in the managed care sector, including Cigna (NYSE: CI) and Coventry Health (NYSE: CVH).
Einhorn notes the entire sector has been battered in anticipation of Obamacare and these companies have unlevered balances sheets and trade at single-digit P/E multiples with growing earnings. They also have no exposure to the European crises, a China slowdown or other cyclical headline. In addition to being just plain cheap, "there is additional unpriced upside in the possibility that the election changes the political landscape, resulting in a possible modification or repeal of Obamacare," Einhorn said.
On Cigna, Einhorn said the stock 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." The fund entered CI at an average price of $45.42.
On Coventry Health, Einhorn said the issues related to the Kentucky contract are "manageable and finite." He sees the company returning to breakeven or a profit on the contract in 2013. The fund's average price on CVH is $31.22.
Einhorn notes the entire sector has been battered in anticipation of Obamacare and these companies have unlevered balances sheets and trade at single-digit P/E multiples with growing earnings. They also have no exposure to the European crises, a China slowdown or other cyclical headline. In addition to being just plain cheap, "there is additional unpriced upside in the possibility that the election changes the political landscape, resulting in a possible modification or repeal of Obamacare," Einhorn said.
On Cigna, Einhorn said the stock 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." The fund entered CI at an average price of $45.42.
On Coventry Health, Einhorn said the issues related to the Kentucky contract are "manageable and finite." He sees the company returning to breakeven or a profit on the contract in 2013. The fund's average price on CVH is $31.22.
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