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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: jeffbas who wrote (3101)	1/26/1998 10:54:00 PM
From: Michael Burry	Read Replies (2) \| Respond to of 78593

Re: OXHP As you know, my analysis changed dramatically with the 12/9 $200M in charges and subsequent apparent press release/conference call cover-up/numbers games that Wiggins played. The article I wrote certainly never anticipated the size and the misdirection involved. I had joked a few days before that it would take $200M in charges to get into risky territory - voila, to my dismay. In general, my analysis hasn't changed since then - very risky but attractive as a takeover candidate by a growing insurer seeking national coverage/with a history of successful acquisitions. If it can show an iota of a successful turnaround with new management, the share price can double back to the mid-high 20's at least. But I really try to avoid ifs, and it is speculative whether previous cash flows will be attained any time soon if at all. It became apparent to me, however, that the entire industry was being hit out of proportion to fundamentals. Oxford wasn't going to recover without the industry recovering (and possibly not even then), and I decided to go with the greater margin of safety in the more mature Pacificare, which I bought Jan 12 at 48 1/4 (down from ~100), as I posted at my web site. Including FHP (which is in the end a success despite the surprises), it has been built on successful acquisitions, and it has a 17 years of experience running brand-name Medicare when all the new plans are bailing on it. It wouldn't be the first time Pacificare has feasted on others' famine and emerged stronger. Besides, it is trading at about 6 X 97 EBITDA, and its members at 536/head were cheaper than Oxford's even at Oxford's discount. Oxford's at 4.3 X the EBITDA it was doing, but whether it will ever hit that again is the whole question. Re: OXHP takeover - with insiders owning so little, no insider buying even at these levels, shareholders growing increasingly frustrated, and new management required anyway, I don't see why the Board wouldn't allow a takeover at a modest premium. Michael Price getting on board PHSYA didn't hurt my decision either, and I must admit I jumped at the chance to get in at a cheaper price than him - amazingly it did get cheaper despite the fact that they announced a buyback only a few days after Price announced his position. I should say I have received a lot of flak for the OXHP story and my subsequent change of opinion, and I don't really wish to get into that all over again, in case readers are thinking they want to discuss those aspects here. You can always e-mail me. Good Investing, Mike