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Biotech / Medical : Oxford Health Plan (OXHP)
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To: Robert DeHaven who wrote (166)11/5/1997 8:31:00 PM
From: Zebra 365  Read Replies (3) of 2068
 
I agree that this stock is a buy at this price. In fact I have been buying and selling stocks for fourteen years and this is the first time I have used margin to load up. I happen to follow HMO's and PPM's very closely. Only a few months ago I was warning people to stay away from this one due to price and the lawsuit.

No, not a shareholder's suit but the suit that OXHP lost which forced them to pay interest on claims not paid. Such suit by the way was public knowledge and the fact of that red flag will probably be a strong defense against shareholders claims that there was no clue that the company had troubles.

When a health insurer is not paying claims, it usually is not to save money but is having problems with data. Aetna went through the same thing and got hit too, but not as bad. Data is the lifeblood to an insurer and that suit was a clear red flag to me.

My scenario is that management did not publicize this information system problem until they had to, so that they could get the contracting done for 1998 first. Now the contracting is complete (usually done by October 1), so there will not be a large membership loss over this fiasco.

So I see the top line being intact, extra reserves taken in this big hit to earnings, and the ship will sail on. Downside here is that, contracting being complete for 1998, they have not been able to raise rates after finding that utilization is higher than projected. So earnings will grow from here but not as fast as in 95-96. I factor that in and it still looks like a buy at this price.

Do your own checking and DD but I agree this may prove to be a short lived opportunity to buy under 25.

Zebra
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