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S. Michael Mandala
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Michael has been serving small and mid-sized enterprises in various capacities for the past 15 years. Mr. Mandala was a founder of StreetOne, an online trading platform for exchange floor brokers. He also has contributed as a strategic advisor to a multitude of publicly traded companies in a... More
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  • Best Places To Protect Your Wealth From A Tumbling Dow

    If there's any time to be weary of the U.S. equity markets, now presents no better time. It was just a few short years ago the Dow Jones Industrial Average crossed over the 14,000 mark and most investors continued to dump money into long positions. Day after day, CNBC's scrolling headlines highlight the day's advances with special notice towards "Dow is so many points from an all-time trading high." These marketing ploys by media drove attention to the greedy nature of climbing stock prices without giving due attention to the fact banks were in trouble, and the country was about to see what "financial crisis" really meant.

    The one thing I've learned in this life is that history will repeat itself. Often. It always scares me when the cover of magazines read like the market is going to bring upon the Second Coming of Christ. Although we hope and pray that would be true, reality does suggest we are in for a huge awakening in the midst of our euphoria. While kids were running around the yard as parents high-fived over their IRA and 401(k) statements, looming around the corner was the biggest reality check this country-and world-has seen since 1929.

    Lehman Brothers filed for bankruptcy, Merrill Lynch collapsed, AIG almost went belly up, and Citigroup needed billions of dollars just to keep its doors open. The collapse of these Wall Street behemoths was just the tip of the apocalyptic iceberg.

    Now our equity markets are boasting over 100% returns since the collapse of 2008. Once again, the headlines read, "Wall Street is Back," on the Economist and similarly copied ad nauseum over financial and news periodicals. I would be remiss if I ignore the fact: The higher we climb, the further we can fall.

    We see big banks are beginning to lend again, innovators on Wall Street are moving the merger and acquisition markets along; it all smells too familiar for comfort. The glaring question is, "if I'm right, where do I put my money in when the Dow continues to climb over new territory every day?" This is a question that should be on the tip of every American investor's tongue… now.

    The Reasonable Approach

    Erring on the side of caution should be your priority when choosing when to move assets to protect the rise in your net worth. Unlike the scores of over-analyzed situations, I've been able to sift through the madness and settle in on the one thing the good Lord gave me… common sense.

    I would imagine when times are good… people drink. When times are bad… people drink. Safe to assume the one observable constant is alcohol consumption. Brown-Forman (BF.A) is the manufacturer of Jack Daniels, Korbel, Southern Comfort, and many more distilled spirits. This stock is resilient to economic collapses, which can be seen in the stock's performance in the 2008 debacle. Only 25% of the stock price was shred while everything under the sun was becoming a "zero-job."

    Another sure bet is a pick that many would roll their eyes at. But if you would've invested in this company in 2008 before the financial collapse, you would've come through by 2010 unscathed. Obviously, many stocks rebounded with vigor in 2009-2010, but none has had over a decade of security and steady dividend payments. Yes, I'm talking about Microsoft (MSFT).

    Bloomberg's Whitney Kisling states, "Computer related stocks have been among the stock market's worst performers. Bulls say they're bargains that will bounce back with the broader economy. Bears see the slump continuing as consumers, corporations, and governments keep a lid on tech spending." Although I agree with both sides-bulls and bears-of this issue, I know I won't loose sleep over the value of my portfolio knowing I had a sizable position in Microsoft.

    Microsoft is the street's most boring and overly invested stock. Nearly every mutual fund annual report lists "MSFT" as a holding, whether it is 0.01% or 5%. I'd rather be bored than be trampled to death by an exciting stock.

    I Understand, You Still Want to Have Fun

    Up market or down market, you still want to view investing as fun. What other way could you spend so much time and effort on a purpose if it wasn't rewarding in other ways than just financially? To give you some fun…

    Take a close look at Energy XXI (EXXI) to put in your portfolio. They are a successful gas and exploration company, which boasts over a 75% success rate in their exploration assets. One of their more recent accomplishments is a $51 million purchase of land to drill that brought a net present value of $283 million. Energy XXI just began a $250 million stock repurchase program and offers a dividend of $0.48 per share. With the Dow over 15,000, I see Energy XXI as a defensive play against larger oil companies due to their malleability to uncertain and risky environments.

    Another interesting play is found in Aegerion Pharma (AEGR). Their main course of business is to produce drugs and therapeutics that treat debilitating and fatal diseases. The treatments they give for people-patients with LDL cholesterol over 300-are very expensive, coming in at $300,000 per patient, per year. Analysts believe they will have over 750 patients next year, which amounts to over $200 million in revenue and $62 million in profit. The stock has already reacted to this news, but below $65 per share, it still is a healthy and safe purchase.

    Far East Energy Corp. (OTCQB:FEEC) is interesting not because of what they do, but who owns them. Taking a close look at the insiders of this company, you see the biggest names in the financial business, including BlackRock and Prudential. These two mutual fund giants own 16% of this tiny company and for good reason…they keep hitting large wells over and over again. So far, they have proven reserves of 51.3 billion cubic feet. Their assets are in China, hence the name "Far East." With these power players behind this company and at current valuations, there isn't much room for failure, and this is why I'd purchase this company right away before another mutual fund decides to buy, then your time for capitalizing on this business is over.

    Last, but certainly not least, is my favorite stock to own as this market rockets to new heights… ActiveCare (OTCQB:ACAR). They are the world's largest provider of cellular glucometers. If that's Greek to you: ActiveCare is the world's largest provider of mobile blood-glucose monitoring. Because of Obamacare, they've capitalized off of the flight to self-insurance. Their current 10-Q (ending March 31, 2013) had shown a leap in gross profit, from $180,000 to $4 million in just one year. The stock hasn't reacted to this news yet, which is interesting, but rest assured, I don't believe it will be down where it is for too long. At $1.50 per share, it's certainly a buy without fear of a collapsing market. With or without the Dow being at 15,000, companies like ActiveCare will benefit from the changing healthcare environment.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    May 27 3:40 AM | Link | Comment!
  • Alere And ActiveCare Cash In On Flight To Self-Insurance

    Beyond the hot air from mass media, government bureaucracies, and pubic opinion, companies both large and small have been watching the changing healthcare environment closely. The reason for this is that every move in today's healthcare legislation is an exponential move in so many businesses' bottom lines because of coverage cost implications. The resulting effects of Obamacare may not only be rising healthcare costs through traditional insurance providers, but also inadvertently offering opportunities for companies such as ActiveCare (OTCQB:ACAR) and Alere (ALR)-along with others-to cash in on the sweeping healthcare changes.

    With Obamacare rhetoric endlessly broadcasted over news channels, the term replaced the bill's original title, "Affordable Healthcare Act," and has become one of the most contested initiatives of President Obama's administration. The Affordable Healthcare Act has taken this country through litigious and bipartisan debates, countless hours of television and radio coverage, and many businesses shaking their heads or their fists.

    The Flight to Self-Insure

    As new healthcare regulations crash on the front steps of corporate America and small businesses, companies who've opted to self-insure their employees have been the first to be able to skirt higher healthcare costs brought on by Obamacare. Self-Insurance has been a mainstay in America for years. According to the Employee Benefit Research Institute, 59% of employers have opted to be their own insurance benefactor, which is up significantly from 41% in 1998. Taking corporate consolidation and washout into consideration over the past fifteen years could put the real percentage increase well over 25%.

    A company choosing to become a self-insured organization, like Ford Motor Company (F) has done in the past, controls their employee healthcare costs. They are able to do this for a variety of reasons, the paramount one being that a self-insured corporation can adjust healthcare benefits to meet their covered population's needs. This minimizes excess spending and prompts businesses to incentivize employees to live a healthy lifestyle. Additionally, moving employee benefits away from traditional insurance providers effectively skirts around the minimum benefit requirement Obamacare.

    According to the New York Times, companies and organizations willing to self-insure are able to initiate stop-losses on their policies, which protects the insurer from large or unexpected claims. With this stop-loss measure in place, businesses are free to venture into new territories, such as required exercise programs and mandated daily vital-sign monitoring, in order to reduce doctor's visits and, consequently, patient claims.

    To get an example of bottom-line savings due to self-insurance, you wouldn't have to look further than Freehold Township, New Jersey. Rather than risk rising premium costs of an average of 20% year-over-year, this municipality is banking on the transparency and control of underlying costs, keeping savings for the township at $500,000 to $1 million per year.

    The Investment Opportunities

    One of the essential components self-insured companies use to control their healthcare costs is employee health monitoring. Providers of health monitoring services and devices stand to benefit greatly from companies seeking to self-insure. Since the flight to self-insurance has increased, the demand for monitoring services has increased as well.

    Companies like ActiveCare (OTCQB:ACAR) have reaped significantly in the self-insurance market by signing up businesses along with local and state governments (such as Louisiana) to be a provider of health monitoring services. Their health monitoring service is a comprehensive solution via real-time monitoring and testing of patient members who unmonitored, would otherwise pose a significant risk in expense in future treatmentCurrent data show a diabetic who is monitoring their blood glucose levels daily-and are accountable for their results-generally costs the health insurance provider approximately $40,000 per year, according to Bryan Dalton of ActiveCare. With their product, Mr. Dalton continues to say, "the insurer can see whether or not the patient member will become a bigger issue down the road and thereby bringing light to a situation where not only will the patient member become sicker, but also cost the insurer over $500,000 per year due to necessary kidney transplants and supplemental medication and hospitalization."

    Programs offered by companies such as ActiveCare are beneficial to the growing population of the self-insured because with the increased visibility into the patient population-their employees-responsible for insuring, each company can, in real-time, project, manage, and adjust their healthcare costs resulting in reduced blows to the bottom line. ActiveCare has seen first-quarter sales rocket from $180,000 last year to $4.8 million in this year. Their ability to equate transparency into businesses' self-insured members to controllable costs versus healthcare costs that would otherwise be a rogue variable is the main impetus for their growth.

    But ActiveCare is not the only one reaping where others have sown. Another investment opportunity rests in Alere . They offer comprehensive chronic care programs designed to increase patient compliance to doctor's orders, quality of life programs, and workplace productivity measures. All of Alere's programs are designed to increase quality of life standards, resulting in healthier members of their client's coverage universe and lowered costs.

    Honeywell's (HON) HomMed Divison is also a major player in this field of advanced remote monitoring solutions for the self-insured care provider. Currently, they have over 70,000 monitors deployed, and that number continues to grow. They are one of the few companies offering complete solutions for remote patient monitoring from tele-health to tele-care, including remote patient management applications, patient decision support, and evidence-based disease management. This division of Honeywell has been around since 1999, and will become more prominent with the new move away from Obamacare regulations.

    The businesses providing the technology to ensure controllable healthcare costs stand to profit greatly over the final years of President Obama's administration. In spite of the Dow crossing into record territory this week, there is arguably a tremendous upside for these companies and their shareholders as the flight to self-insurance accelerates. As the climate on Main Street shifts due to the changes from Pennsylvania Avenue, we will see even more businesses like ActiveCare and Alere cash in on the flight of businesses from the blue shields of the 20th century to the raised fists of autonomy in the 21st.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Tags: ACAR, ALR, HON, long-ideas
    May 23 7:31 AM | Link | Comment!
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