Drinks & Dividends Get Togetehr August 3rd
The first thing we discussed at the get together was the Fed and whether they would raise rates.
The interest rate has a grip on the stock market. A small jump of 0.25% is in itself not very powerful, but the context is important. The market is looking for guidance. They will be happy to hear no more rate hikes. They will be unhappy to hear "maybe more rate hikes" because that "maybe" is not clear guidance.
Folks felt that another hike was due. Kasey mentioned the hike last week in Britain. So we discussed the context. Would the message be "maybe more" or all done? I suppose that today, we'll get to find out.
We looked at several companies and then focused on two very interesting companies: Safeway and Aetna.
SAFEWAY (large grocery store chain)
Safeway reported earnings and there was some surprise growth. We suspect that Albertson's problems are Safeways gains. Many local Albertsons stores are being closed. That can only be good for Safeway.
Additionally, Safeway is fairly immune to recessionary factors. People have to eat. And Safeway is fairly immune to gas prices.
This would be a defensive play.
AETNA (large healthcare company)
Comparing Aetna to its competitors (UNH, Cigna) is very eye opening. On every metric (P/S, P/E, PEG), Aetna is priced lower.
What really is exciting is the massive cash position. Aetna is sitting on $13B of cash after debt.
That is special for two reasons:
1. Its competitors do not have a similar cash position
2. The stock price is very close to the cash per share price. The cash value of the company is $23 per share and it is trading at ~$32.
3. The Market cap of the company is $18B, just above their cash position
The company is kicking out $1B+ in net income each quarter.
Now for the down side. There are reasons for Aetna to be so low.
Aetna disappointed investors 2 quarters in a row. Moreover guidance is murky - it seems to be growing customer base slower and costs are rising.
The healthcare industry is not an exciting place to be. There aren't many growth prospects and medical costs are rising.
But Aetna is interesting because of the unique cash position.
This is a buy
The interest rate has a grip on the stock market. A small jump of 0.25% is in itself not very powerful, but the context is important. The market is looking for guidance. They will be happy to hear no more rate hikes. They will be unhappy to hear "maybe more rate hikes" because that "maybe" is not clear guidance.
Folks felt that another hike was due. Kasey mentioned the hike last week in Britain. So we discussed the context. Would the message be "maybe more" or all done? I suppose that today, we'll get to find out.
We looked at several companies and then focused on two very interesting companies: Safeway and Aetna.
SAFEWAY (large grocery store chain)
Safeway reported earnings and there was some surprise growth. We suspect that Albertson's problems are Safeways gains. Many local Albertsons stores are being closed. That can only be good for Safeway.
Additionally, Safeway is fairly immune to recessionary factors. People have to eat. And Safeway is fairly immune to gas prices.
This would be a defensive play.
AETNA (large healthcare company)
Comparing Aetna to its competitors (UNH, Cigna) is very eye opening. On every metric (P/S, P/E, PEG), Aetna is priced lower.
What really is exciting is the massive cash position. Aetna is sitting on $13B of cash after debt.
That is special for two reasons:
1. Its competitors do not have a similar cash position
2. The stock price is very close to the cash per share price. The cash value of the company is $23 per share and it is trading at ~$32.
3. The Market cap of the company is $18B, just above their cash position
The company is kicking out $1B+ in net income each quarter.
Now for the down side. There are reasons for Aetna to be so low.
Aetna disappointed investors 2 quarters in a row. Moreover guidance is murky - it seems to be growing customer base slower and costs are rising.
The healthcare industry is not an exciting place to be. There aren't many growth prospects and medical costs are rising.
But Aetna is interesting because of the unique cash position.
This is a buy
posted by Andrew at
6:36 AM
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