The Thread Formerly Known as No Rest For The Wicked Message Board

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Strategies & Market Trends : The Thread Formerly Known as No Rest For The Wicked

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To: Robert V. Cavaleri who wrote ()	4/3/1999 9:57:00 AM
From: backman	Read Replies (1) of 90042

for those of you not well-divesified (ie too many eggs in takeover basket)(from thestreet.com) Don't Bet the Farm on a Takeover By James J. Cramer 4/2/99 4:49 PM ET Can you believe how many of these little medical companies keep blowing up? Hardly a day goes by when one doesn't hit the skids. They dominate the new-low list and the biggest-percentage-decliners list. People drop coverage of them and get spooked by them. All the while, they keep looking cheaper and cheaper and cheaper. To no avail. On Thursday I took a bath in one: Humana (HUM:NYSE). I felt like that woman in the bathtub in The Shining when I was through with it. I got in because it looked cheap. Heck, don't they all in this group. I figured the HMOs are getting some pricing, and Humana might just make the quarter and then some. Meanwhile, it could get a takeover bid, as it did try to sell itself once before and I am of the opinion that once a seller, always a seller. So then why did I boot it? First, this Medicare payments stuff scares me. The government is just not the same old government. Congress is in no mood to pamper the HMOs and I think that pricing is going to get tougher. Also, Humana had a difficult contract negotiation with Columbia (COL:NYSE) hospitals in Florida, and I didn't want to be in to see what the results are. Looks like I was not alone. The stock was down heavily Thursday when Humana announced that it had a deal with Columbia but would not disclose the terms. In this market that's the kiss of death, as the worst was immediately assumed. So why not hold on for a takeover? Because I never own a stock with deteriorating fundamentals with the hopes of getting a takeover bid. It is too likely that in the interim I will lose money or that management itself will be unable to sell at a good price because business is bad. Sure, I will miss some takeovers because of this rule. But, more important, I will stay off the new-low and biggest-percentage-decliner lists. Takeovers are gravy; you can skip them. But those losers take away your meat and potatoes. I'm not going to lose those for a phantom bid. " david

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