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  • Analyst Will Remain Skeptical Of Aetna's Future 14 comments
    Oct 8, 2013 10:58 AM | about stocks: AET, CI, SPY

    Summary

    Aetna Inc. (NYSE: AET) is a diversified healthcare benefits company with headquarters in Hartford, Connecticut. Aetna offers three different services: group insurance, large case pensions and health care. With group insurance, Aetna provides a number of life insurance products, including voluntary spouse and dependent term life insurance, group term life insurance, and dismemberment and accidental death insurance. Large case pensions supply a variety of retirement products, such as annuity and pension products for tax-qualified pension plans.

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    The health care category provides pharmacy benefit management, as well as medical, behavioral health, vision and dental plans. Founded in 1853 and basing its name on a volcano, Aetna eventually hired its first employee in 1854. Eleven years later, theeToro Openbook company's annual income topped $1 million. In 2013, with 49,000 employees, Aetna has 22 million medical members, 14.3 million dental members and 13.8 million pharmacy members. Its healthcare network includes more than 1 million healthcare professionals, with 597,000 primary-care doctors and specialists, and 5,300 hospitals. Its 2012 revenue totaled $35.54 billion.

    Financials

    On October 2, Aetna's share price closed at $64.76. The company's market cap is $24.10B, with an enterprise value of $28.99B. Its fiscal year ends on December 31, with a profit margin of 4.30% and an operating margin of 8.39% . Since October 2012, share prices have increased 56.43%. During the same 52-week period, Aetna stock reached a high of $69.19 and fell to a low of $40.32.

    Aetna had strong shareholder returns in 2012, just over 11% compared with its three-year average (end-2012) of 50%. It also raised dividends in 2012, announcing a quarterly increase of 14%, an increase to $0.20 per share from $0.175 the previous year. Its balance sheet at the end of June 30 showed that numbers were still on the downside. Although the company had $4.40B in total cash, its total debt was $9.30B, while operating cash flow was $1.29B and levered free cash flow was $2.07B. As of October 2, most analysts rated Aetna as between a "buy" and "hold," which is partly due to Aetna's debt issue. Analysts also predict that Aetna's growth will fall by 1.30%. But, a huge turnaround is expected, with analysts predicting that Aetna will increase by 43.60% in the following quarter.

    In 2013, total growth is expected to be 14.8%, falling to only 7.8% in 2014. The company should see a slight decline in growth over the next five years (beginning 2014) compared to the past five years when Aetna grew by 12.89% annually. In the next five years, it is estimated that growth will increase annually by 11.57% .

    Balancing Act

    The biggest concern for investors buying into Aetna is how it plans balance its debt. Although Aetna has manages to grow in in terms of overall revenue, sales and growth, it remains to be seen if it can find a solution to its biggest financial issue. Until this happens, analysts will remain skeptical about Aetna and its future in the stock market.


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

    Stocks: AET, CI, SPY
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Comments (14)
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  • DAG Investments
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    Comments (4132) | Send Message
     
    Analysts have been skeptical of AET since it was $7/share. Personally, I've been skeptical of those analysts since AET was $7/share. lol Seriously though, perhaps they're just skeptical of the ACA's ability to survive the Koch brothers, Tea Party and the like.
    9 Oct 2013, 02:15 PM Reply Like
  • Volatility Research
    , contributor
    Comments (27) | Send Message
     
    Author’s reply » lol, I agree... Aetna is just one of those companies who never gets a good collective light. I don't really see the overall downfall of AET. I feel that EMH has levied it's way into the share value and growth. The overall market correction and growth has been factored into all of AET constant situations. Efficent Market Hypothesis, is the only factor that analyst seem to over look, though I feel that EMH is another word for "Skeptical". >.>
    9 Oct 2013, 02:40 PM Reply Like
  • DAG Investments
    , contributor
    Comments (4132) | Send Message
     
    Good points. Perhaps said analysts could benefit from the concept of "Seeking Truth From Facts" in Chris DeMuth Jr.'s Instablog.

     

    In my view, skepticism is certainly prudent, but only to a degree, before it becomes counterproductive. Especially considering that the healthcare market is very much in a transitional state, I'm not so sure that all synergies from the Coventry acquisition are fully priced in. I suppose time will tell. I'm holding tightly in the meantime and may even add if I think I can catch the worst of the corrections DC blesses us with.
    9 Oct 2013, 02:57 PM Reply Like
  • Volatility Research
    , contributor
    Comments (27) | Send Message
     
    Author’s reply » Yes, indeed I follow Chris as well. I find his blog among the best on this site, as well as articles. I am doing the same as you, I am currently holding, though I will probably buy, if the conditions are right towards the begining of the year. I plan on collecting some nice sell-to-open PUT premium on AET in January :-)
    9 Oct 2013, 03:31 PM Reply Like
  • DAG Investments
    , contributor
    Comments (4132) | Send Message
     
    "I find his blog among the best on this site, as well as articles." I agree ... I just had to stop officially following him since he posts sooo much it was making me miss everything from anyone else.

     

    I'm saving my foray into options until I'm fully retired since, with something like options, I consider it dangerous to be only half in, so to speak. Plus, I'm CDO, which is like OCD (Obsessive Compulsive Disorder), except the letters are in alphabetical order, as they should be. ;~) So, it's impossible for me to do anything half way.

     

    In the meantime, I just trade around my existing positions with stocks that I already have big gains and that are relatively volatile. I tried to explain my methodology in one of my Instablogs, although it's more directed at beginners.
    9 Oct 2013, 03:56 PM Reply Like
  • Volatility Research
    , contributor
    Comments (27) | Send Message
     
    Author’s reply » Yeah, I am going to check out your instablog. You should check out mine as well! It's indepedently hosted http://www.GuruVIX.com, you can find it through my profile as well.
    9 Oct 2013, 04:53 PM Reply Like
  • DAG Investments
    , contributor
    Comments (4132) | Send Message
     
    Absolutely will do, thanks. It'll take me a while though ... got a backlog of articles I want to get out while the market is still weak.
    9 Oct 2013, 04:58 PM Reply Like
  • Volatility Research
    , contributor
    Comments (27) | Send Message
     
    Author’s reply » lol Take your time, if your interested i would love for you to do an article for my site!
    9 Oct 2013, 05:09 PM Reply Like
  • DAG Investments
    , contributor
    Comments (4132) | Send Message
     
    That would be great ... I just have to figure out how to come up with more hours to do more research and writing ... at the moment, I'm really struggling to get done the ones that are being picked as exclusive to SA, but I'm really counting on getting better/faster at it since I don't sleep as it is and I'm too old to do that much longer. lol
    9 Oct 2013, 05:18 PM Reply Like
  • Volatility Research
    , contributor
    Comments (27) | Send Message
     
    Author’s reply » I totally hear you on that, I feel the same way. We are doing paid contributors as well starting next week. So that should give you something to consider as well. Its pretty hard as it is to get the word out, it would be great to find more supporters. I just don't really care for what Seeking Alpha has become! It seems as though everyone is just trying to out-smart the other contributors! I just want people to write about trades, and speculation, and good information overall by people who are actually investors and analyst as well as traders. Know what I mean?
    9 Oct 2013, 08:19 PM Reply Like
  • DAG Investments
    , contributor
    Comments (4132) | Send Message
     
    I do understand what you mean. The vitriol that often comes into it was the main reason I didn't become an official contributor until recently, even though I'd been frequenting SA for 4-5 years prior. In fact, I recently decided that I'm going to try my best to never again read or comment on an article about GE since it really solicits the most emotional reactions (perhaps only rivaled by AAPL).

     

    I guess it's just human nature and inherent in investing/trading. Everyone believes their thesis is strong(est) and wants to be right. I guess that's what makes a market, as they say. In fact, I think the same happens everywhere, including on the floor of the exchange, so I can't really hold it against SA. SA just has a big audience so its more likely to draw some of the instigator type personalities that are out there too.

     

    Even so, I've often learned things and gotten interesting leads from comments, etc. so I think a lot of the value I get out of an investing site would be lost without the unpleasant task of wading through all the BS too. I try to remind myself that, without darkness, light has no meaning or value. Doesn't always work, but it sounds good. lol

     

    Anyway, I had already thought about the possibility of contributing to other sites too so I'll definitely be interested at some point. For the reason I mentioned earlier, I just decided that I'd wait a while before pursuing that possibility at all, rather than further burn myself out and end up losing interest in all of them. I'll always be in the market so I want to make sure I retain the resources I value.
    9 Oct 2013, 08:59 PM Reply Like
  • Volatility Research
    , contributor
    Comments (27) | Send Message
     
    Author’s reply » Agreed, and Understood :-) Happy writing!
    9 Oct 2013, 10:46 PM Reply Like
  • DAG Investments
    , contributor
    Comments (4132) | Send Message
     
    Thank you and likewise. By the way, the site is very nice. I was only able to read one article (PFE) and it is good. I did notice that the pipeline slide can't be enlarged ... just a thought.
    9 Oct 2013, 11:10 PM Reply Like
  • Volatility Research
    , contributor
    Comments (27) | Send Message
     
    Author’s reply » ill work on it! Thank you
    10 Oct 2013, 10:24 AM Reply Like
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