Steven Romick manages $11.3 billion in assets in the value-oriented FPA Crescent Fund (FPACX, Financial). He added two new stocks – both of the health care sector – in the second quarter: Health Net Inc. (HNT, Financial) and CareFusion Corp. (CFN, Financial).
In his last letter, Romick said that he could not predict whether the economy would experience inflation or deflation, and therefore positioned the portfolio not to “succeed terrifically well in either scenario, but may perform adequately in any scenario.”
Below is an overview of his two new stock picks.
Health Net (HNT)
His smaller purchase, Steven Romick purchased 1.958 million shares of Health Net for $30 per share on average. The position accounts for 0.92% of his portfolio. He has owned the stock before, making a sizable profit on it in 2009 and 2010:
Health Net’s share price midday Friday is $32.50, near a one-year high, after trading up 33.62% year to date.
The company engages in managed health care services through health plans and government-sponsored managed care plans, with approximately 5.4 million clients through group, indicidual, Medicare, Medicaid, U.S. Department of Defense, including TRICARE and Veterans Affairs plans.
Financially, Health Net in the first quarter reported net income of approximately $50.1 million, compared to a loss of $26.6 million the previous year. In April of 2012, Health Net sold its Medicare stand-alone Part D business. Revenues declined 1.2% from the previous year. Health Net has $2.0 billion on its balance sheet, up from $1.8 billion the previous year.
The company also repurchased approximately 2.7 million of its shares for approximately $70 million during the quarter, leaving about $280 million under its authorized $400 million share purchase program.
See Health Net’s revenue and net income history below:
Health Net has a P/E of 13.7, P/B of 1.7 and P/S of 0.20, which is close to a one-year high.
The Peter Lynch chart indicates that it is undervalued:
CareFusion Corp. (CFN)
The larger new position, Romick allocated 2.6% of his portfolio to CareFusion, purchasing 4,794,400 shares for $35 per share on average.
CareFusion stock is up 35% year to date and trades for $38.58 per share on Friday, near a five-year high.
CareFusion helps the global health care industry by providing technologies that improve patient care, such as infusion pumps, ventilators, surgical instruments, and many others.
In its third quarter results, reported May 9, CareFusion posted a 2% decline in revenue to $901 million, in line with company expectations. Net income increased to $84 million from $32 million the previous year. The company also repurchased 3.3 million shares using $112 million of its $500 million share repurchase program during the quarter.
For full-year 2013 CareFusion is expecting constant currency revenue to be flat to down low-single digits on a percentage bases compared to the previous year. This is a downward revised forecast from the previously expected revenue growth of 1% to 3% it previously expected. It maintained its expectations for adjusted diluted EPS from continuing operations.
CareFusion’s five-year revenue and earnings history:
The company also has a P/E of 23.3, P/B of 1.5 and P/S of 2.34, which is near a five-year high.
The Peter Lynch chart is suggesting CareFusion is overvalued:
See more Steven Romick picks in his portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Steven Romick.
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In his last letter, Romick said that he could not predict whether the economy would experience inflation or deflation, and therefore positioned the portfolio not to “succeed terrifically well in either scenario, but may perform adequately in any scenario.”
Below is an overview of his two new stock picks.
Health Net (HNT)
His smaller purchase, Steven Romick purchased 1.958 million shares of Health Net for $30 per share on average. The position accounts for 0.92% of his portfolio. He has owned the stock before, making a sizable profit on it in 2009 and 2010:
Health Net’s share price midday Friday is $32.50, near a one-year high, after trading up 33.62% year to date.
The company engages in managed health care services through health plans and government-sponsored managed care plans, with approximately 5.4 million clients through group, indicidual, Medicare, Medicaid, U.S. Department of Defense, including TRICARE and Veterans Affairs plans.
Financially, Health Net in the first quarter reported net income of approximately $50.1 million, compared to a loss of $26.6 million the previous year. In April of 2012, Health Net sold its Medicare stand-alone Part D business. Revenues declined 1.2% from the previous year. Health Net has $2.0 billion on its balance sheet, up from $1.8 billion the previous year.
The company also repurchased approximately 2.7 million of its shares for approximately $70 million during the quarter, leaving about $280 million under its authorized $400 million share purchase program.
See Health Net’s revenue and net income history below:
Health Net has a P/E of 13.7, P/B of 1.7 and P/S of 0.20, which is close to a one-year high.
The Peter Lynch chart indicates that it is undervalued:
CareFusion Corp. (CFN)
The larger new position, Romick allocated 2.6% of his portfolio to CareFusion, purchasing 4,794,400 shares for $35 per share on average.
CareFusion stock is up 35% year to date and trades for $38.58 per share on Friday, near a five-year high.
CareFusion helps the global health care industry by providing technologies that improve patient care, such as infusion pumps, ventilators, surgical instruments, and many others.
In its third quarter results, reported May 9, CareFusion posted a 2% decline in revenue to $901 million, in line with company expectations. Net income increased to $84 million from $32 million the previous year. The company also repurchased 3.3 million shares using $112 million of its $500 million share repurchase program during the quarter.
For full-year 2013 CareFusion is expecting constant currency revenue to be flat to down low-single digits on a percentage bases compared to the previous year. This is a downward revised forecast from the previously expected revenue growth of 1% to 3% it previously expected. It maintained its expectations for adjusted diluted EPS from continuing operations.
CareFusion’s five-year revenue and earnings history:
The company also has a P/E of 23.3, P/B of 1.5 and P/S of 2.34, which is near a five-year high.
The Peter Lynch chart is suggesting CareFusion is overvalued:
See more Steven Romick picks in his portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Steven Romick.
Not a GuruFocus Premium Member? Take a 7-Day Free Trial.
