7 Reasons To Own This $7 Stock

| About: Health Management (HMA)

The stock market is looking increasingly stretched. One area that I think will outperform over the next six months due to its defensive nature (I am expecting a flat to down market over the next half year) and the fact the sector has underperformed the S&P so far in 2012, is healthcare. One small cap stock I like here at current prices is Health Management Associates (NYSE:HMA).

7 reasons to own this $7 stock:

  • There has been net insider buying in this stock over the last six months.
  • The stock looks like it has established a solid base of support in the $6 to $7 price range limiting downside (See Chart)

(Click to enlarge)

  • Consensus earnings estimates for FY2012 and FY2013 have moved up over the last thirty days.
  • HMA is some 50% under consensus price targets. The median price target of the 17 analysts that cover the stock is $10.50 a share.
  • The stock has a low five year projected PEG (.67) and its market capitalization is just three times operating cash flow.
  • The stock has a history of beating earnings expectations. In fact, it has beat consensus earnings estimates for at least twelve straight quarters.
  • The stock is selling for just 7 times forward earnings and growing smartly by acquisitions. It recently added Mercy Health Partners ($600mm in annual revenues).

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in HMA over the next 72 hours.