Wednesday, December 3, 2014

Obamacare is a cash cow for insurers! Long Anthem.

Anthem has first mover advantage in selling health insurance through Obamacare exchanges. In their recent earnings announcement they topped earnings expectations, raised guidance on earnings, suggested a dividend increase, mentioned that health insurance plan prices will increase at 6% rate for the foreseeable future, and also said the market was overestimating the costs of the new health plan members enrolling through the Obamacare exchanges. Every one of those data points provided by the company is a positive sign for future earnings. Moreover, it is expected that many enrollees in Obamacare plans will reenroll with the same plan into next year, further supporting earnings growth that Anthem has seen over the past year. The author of this newsletter is long ANTM JAN 2016 $130 Calls / short ANTM JAN 2016 $135 Calls at a net price of $2.45.

Wednesday, November 5, 2014

Radian is rad

Ever since Fannie and Freddie priced themselves out of the private mortgage insurance market, it has been a feeding frenzy. Both Radian and MGIC have leveraged up with equity offerings to expand their market reach to take advantage of the new market opportunities. Radian has started to significantly benefit from that investment.
This newsletter noted in a previous post that Radian was already showing decreasing deliquency trend that was ahead of Wall Streets valuation. In Q3 of 2014, Radian actually doubled analysts earnings estimates for the stock. Based on earnings this year Radian is selling at less than 10 times earnings. Extremely cheap for a market leader. Not to mention this is the value when home sales are still way below historical mean. Also home lending credit is tight and in the process of loosening, which will bring an increasing amount of customers to use mortgage insurance. The kids say "Radian is rad!" The author of this blog will buy RDN May 2015 $17 Calls and sell RDN May 2015 $18 calls for a net cost of $.34. $.34 down side, $.66 upside.

Saturday, August 23, 2014

New items in the aisle at Wal Mart

Wal-Mart recently has suffered from cuts in government assistance payments after the end of the Great Recession. As a result, same store sales have suffered as low end shoppers retrench. But after three years of flat earnings, decreasing US unemployment trends, accelerating wage increases, and a tuned online strategy should return Wal Mart to earnings growth. Moreover, Wal-Mart international continues to expand. All of these factors should bring Wal-Mart higher over the next year. The author of this blog is .... Long Wal-Mart JAN 2016 $75 CALL Short Wal-Mart JAN 2016 $77.5 CALL ....for a net credit of $1.25