The share purchases came about two weeks after HMA issued a statement in regards to a report done by television program 60 Minutes, which claimed that HMA pressured patients into pursuing unneeded treatments to boost profits.
The segment aired on Dec. 2, presenting more than a year’s worth of research done by 60 Minutes reporters. The show included physician interviews discussing the inappropriate hospital admissions to the company’s emergency rooms, as well as patients who were supposedly targeted in the scheme.
To refute the claims, HMA held a conference call on Nov. 30, right before the segment aired, making public its admissions data which, according to an HMA press release, “demonstrated that admissions rates from the company’s emergency rooms were in line with national norms and consistent over a several year period.”
After the show aired, HMA pointed out that 60 Minutes failed to make any mention of HMA’s admissions data that proved its claims erroneous. HMA also noted that the show focused entirely on “disgruntled former employees of the company and former contracted physicians [who] are seeking financial gain through active litigation with Health Management.”
When the company’s statements were released, its stock jumped.
HMA data by GuruFocus.com
While it traded around $7 around the time of the segment, it rose to $9 on Dec. 19, the day Glenview purchased almost 8 million shares of the company, boosting its stake by 31.14 percent. On the following day, the fund purchased almost 5 million shares, which grew its stake by 14.82 percent.
Glenview, whose portfolio consists of more than 40 percent healthcare stocks, is now over 13 percent owner of HMA’s outstanding shares. While it only owned 10 percent of outstanding shares in the end of September with 26 million shares, it has sprouted its current holding to 38,589,730 shares.
Year to date, HMA’s market value has delivered about 24 percent in gains. Its third quarter fiscal results stated an increase in diluted earnings per share from continuing operations by 5.9 percent, an increase in net revenue by 18 percent, an increase in adjusted EBITDA by 26.9 percent and an increase in admissions by 4 percent – all compared to year-over-year data.
Its 10-Year Financials reveal a healthy revenue growth rate: 32.2 percent in 10 years, 5.6 percent in five years and 11.3 percent in the past 12 months. Its average annual growth rate is 10.1 percent.
With two stars in Business Predictability, GuruFocus ranks HMA 5 in Financial Strength and 7 in Profitability and Growth.
Glenview Capital has only reduced its stake once since acquiring HMA’s stock in the first quarter of 2011. Other Gurus who have holdings of HMA include Edward Owens, Columbia Wanger and Richard Snow (HMA: Holding History).
As of the end of September, HMA remained as Glenview’s twelfth largest holding.
To view more of Glenview Capital’s latest trades, go to its Stock Picks. Also see its undervalued stocks, high-yield companies and top growth stocks.
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