Tuesday, September 29, 2009

Two Under Valued Companies Trading at Their Cash Value

Without getting into the current Healthcare Reform issues. Here are two managed-care companies Humana Inc. and Molina Healthcare that are now selling for what they currently have in cash. Humana has nearly doubled off its march low while Molina is only up about 30 percent. Both have current ratio's above the 1.5 ratio, which is a measure of a company's ability to pay back short- term debt with its short term assets. A ratio of under 1 shows that they might be hard pressed to pay off any monies owed if it were due at that point. Molina is currently trading at 1x book value while Humana has a book value ratio of 1.28. Molina has increased its book value almost 5.5x since 2002
while Humana has increased theirs 3x which is a key measure that Warren Buffett looks for.Both seem to be consistent free cash flow generators another key measure that most value investors look for. Income investors might want to look elsewhere due to the fact that neither company pays a dividend.

CompanySymbolCash/sharePrice as of 9/28/2009Book value/shareCurrent ratio
P/E ratioMarket cap
HumanaHUM$36.57$38.03 $29.821.627.56.3b
Molina HealthcareMOH$21.59$20.97$20.941.889.4537m

*The Molina family along with other insiders hold 51% of the stock. Currently 20% of the float is being shorted.

*Value Investor Bruce Berkowitz of The Fairholme Fund ($FAIRX) owns 9.5 million shares of Humana which represents a top ten holding for the fund.

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