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 (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)
- 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.