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Dodge & Cox Reduces Holdings in Health Management Associates Inc. By More Than 50%

July 12, 2009 | About:

guruek

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(GuruFocus, July 12, 2009) Investment Guru, Dodge & Cox reduced their holdings in Health Management Associates Inc. (HMA). Data shows on June 30, 2009, Dodge & Cox sold 58.78% of their entire stake in HMA at the price of $4.94 per shares. After the sale, the money management firm still holds 10.3 million shares.

Health Management Associates Inc. provides a broad range of general acute care health services in non-urban communities. Health Management Associates Inc. has a market cap of $1.2 billion; its shares were traded at around $5.02 with a P/E ratio of 12.5 and P/S ratio of 0.3. Health Management Associates Inc. had an annual average earning growth of 25.2% over the past 10 years. GuruFocus rated Health Management Associates Inc. the business predictability rank of 3.5-star.

Dodge & Cox was seen to first own 8.6 million share of HMA in 1Q06. They accumulated shares to a peak of 26.7 million shares through 1Q07 and has been seen selling shares in HMA since then, although at a very slow pace. By the end of 1Q09, they still had about 25.0 million shares in their account. The latest sale reduced their position by more than a half. Dodge & Cox bought most of their position at the prices of above $20 per share. The Price has declined about 75% from the purchase price. Dodge & Cox stands to loose about $400 million dollars on this single stock if it sells the rest of the position as well.

Dodge & Cox is not the only Investment Guru who owned the stock. Six other Gurus also own the stock as of 1Q09. Among them, David Einhorn, Edward Owens, and Bruce Sherman each owns a significant position, according to GuruFocus data.

GuruFocus data also shows the most recent insider trades have been buying: Executive VP and CAO Kelly E Curry bought 50,000 shares of HMA stock on 05/04/2009 at the average price of $4.62, and Executive VP and CAO Kelly E Curry bought 25,000 more shares of HMA stock on 02/27/2009 at the average price of $2.2.

On Apr. 27, 2009, HMA announced its consolidated financial results for the first quarter ended March 31, 2009. For the quarter, HMA reported net revenue of $1,188.0 million and earnings before interest, income taxes, depreciation and amortization, gains and losses on sales of assets, gains on the early extinguishment of debt, and write-offs of deferred financing costs (“EBITDA”) of $183.4 million. Income from continuing operations was $54.1 million and net income attributable to HMA common stockholders was $46.0 million, or $0.19 per diluted share. Included in diluted EPS for the quarter ended March 31, 2009 was a $16.7 million gain from the early extinguishment of debt. Results for the prior year’s first quarter ended March 31, 2008 included a $203.3 million gain on the sale of a 27% interest in seven hospitals to Novant Health. Excluding these gains, diluted EPS from continuing operations for both quarters would have been $0.15, as shown in the tables accompanying this press release. Such tables also contain a reconciliation of income from continuing operations to EBITDA, which is not a GAAP measure, and contain other information regarding HMA’s use of EBITDA.

HMA will issue a press release after the market closes on Monday, July 27, 2009.

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