Last Buy of 2005: Alliance Healthcard (ALHC)

by: Microcap Speculator

The Microcap Speculator submits: drumroll please...My last buy of 2005 was a tiny, thinly-traded stock called Alliance Healthcard (ticker: ALHC.ob). Alliance runs healthcare (medical, vision, dental) discount programs for the uninsured and underinsured.

Here is the company's business plan, as described in the 10-K filed last week:

Alliance HealthCard offers third-party organizations self-branded or private-label healthcare savings programs through its existing provider networks and systems. Founded in 1998 by health-care and finance experts to address the need for affordable health care nationwide, Alliance HealthCard now accesses a network of more than 600,000 healthcare professionals. These programs allow the Company’s subscribers to obtain substantial discounts in over 16 major healthcare services.

The Company does not sell insured plans. However, the discounts realized by its members through its programs typically range from 10% to 75% off providers’ usual and customary fees. The Company’s programs require members to pay the provider at the time of service, thereby eliminating the need for any insurance claims filing. These discounts, which are similar to managed care discounts, typically save the individual more than the cost of the program itself.

Alliance reported net income of $824,389 (or about $.18/share) in 2005. This figure includes roughly offsetting extraordinary expenses due to settlement of a lawsuit against Medco and extraordinary gains from a deferred tax benefit. The company added clients in 2005, although its revenues are still highly concentrated. Unless it loses one of its two major customers, I expect that Alliance will increase revenue and earnings in 2006. At a P/E of around 5, that is a risk I am willing to take.

DISCLOSURE: I am long ALHC.OB. Not a recommendation to buy or sell any security. For informational and educational purposes only.