Insider's Edge: Healtheon/WebMD: Nursing its Way Back
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individualinvestor.com
By Alexander Yakirevich (7/27/00)
It's been a few months since we last we wrote about Healtheon/WebMD (NASDAQ: HLTH - Quotes, News, Boards), and at that point, the stock was under some pressure, but we still came away with a bullish perspective.
Unfortunately, the stock has only floundered since then. Wednesday, the shares closed at $14.25, but we're ready to revisit the stock, and this time, we're even more convinced of the argument in favor of the shares.
What made us revisit Healtheon? Well, it's not everyday that the venture capitalist with what is arguably the most gold-plated reputation in Silicon Valley buys a big block of shares.
The venture capitalist in question John L. Doerr is a general partner at Kleiner Perkins Caufield & Byers, perhaps the best known high-tech VC firm around. Doerr's an outside director for Healtheon, and his purchase of 136,000 shares from May 5 to May 19 came on the heels of another transaction in April of this year when he acquired 75,000 shares. The purchases brought hiss stake in the company to a grand total of 8.4 million shares.
Other insiders purchased another 25,000 shares in the company during May, putting a cumulative total of $2.8 million on all the insider buying during the month.
Doerr's investment track record could be of interest to investors. While he seemed to miss the mark completely with Martha Stewart Living (NYSE: MSO - Quotes, News, Boards), selling almost 21,000 shares at $12 in early April just to see the stock rallying 97%, to 52-week high of $23.69, his timing in several other cases was impeccable.
In May 1998, he sold more than 11,000 shares of Shiva , a provider of communications systems for remote access, at a price of $10.31. By the end of December of that year, the stock was trading at $5.66. In March 1999, the company was bought by Intel (NASDAQ: INTC - Quotes, News, Boards).
In another instance, Doerr disposed of 201,433 shares of a biopharmaceutical concern RiboGene in February 1999 at an average price of $2. The stock dropped 25%, to $1.50, in the next five months. The company was eventually acquired by Questcor Pharmaceuticals (NYSE: QSC - Quotes, News, Boards) in November 1999.
Clearly, Doerr knows when to sell. But our thinking now is that he also knows when to buy.
The healthcare industry is plagued with inefficiencies and waste caused not only by cumbersome provider reimbursement system, but also by medical billing errors resulting from predominately manual claim processing method. Ruby G. Holder of ING Barings, who refers to data compiled by the American Medical Association, notes in the recent report that only 41% of all physicians in the U.S. utilize computer technology in their practices.
Insufficient level of automation in the healthcare industry also leads to rising number of fatal medical mistakes. In fact, according to statistics cited by Dain Rauscher Wessels, approximately 98,000 Americans pass away each year due to erroneous treatment plans or incorrect prescriptions caused by human error. |
