David Einhorn: Health Care
David Einhorn bought a bunch of health care stocks last quarter, including Aetna (NYSE:AET), Cigna (NYSE:CI), UnitedHealth Group (NYSE:UNH) and WellPoint (NYSE:WLP). The big kahuna last quarter, however, was Coventry Health Care (NYSE:CVH). Greenlight Capital bought about 6.7 million shares of the managed care company — a $212 million investment.
It’s not hard to understand the attraction. Leading up to and shortly after President Barack Obama’s health care overhaul becoming a Supreme-Court-ratified law in late June, the health care provider industry’s stocks were pressured lower … perhaps too much, making them bargains now. Of course, Aetna saw things the same way, which is why it acquired Coventry this morning at an 18% premium, making Einhorn look like a genius in the process. (Did he know something?)
Be that as it may, while the increasing number of insured patients looks encouraging for the insurers as well as the hospitals, the flip side is, the same law also cranks up the legal requirements to what some might consider a stifling degree. Although it meant a major boost for Coventry today, it remains to be seen whether Obamacare is going to be a blessing or a curse for the industry. Taking on a health care provider bet at this juncture might not be the best risk-reward decision, even if some more M&A is in the cards as these players seek to share costs.