Einhorn's Greenlight Enters Obamacare-Battered Cigna (CI) and Coventry Health (CVH)

July 24, 2012 1:12 PM EDT Send to a Friend
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.


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