SAC disclosed ownership of about 4 million shares of $2.5 billion market cap health insurer Health Net, Inc. (NYSE:HNT), or 5% of the company. Last quarter Health Net’s revenue was down modestly compared to the second quarter of 2012, but due to cost cutting operating income increased considerably in percentage terms. Earnings per share for the first half of the year were $1.05, which when annualized makes for a P/E multiple of 15 at current prices. The stock has steadily risen over 70% in the past year. D.E. Shaw had owned 1.9 million shares of Health Net according to its most recent 13F; that fund is managed by billionaire David Shaw (research more stocks D.E. Shaw owns).
We don’t expect Health Net, Inc. (NYSE:HNT) to continue to be able to drive significant increases in operating profits from lower costs if revenue continues to lag, but the stock is cheap enough that it may be worth comparing to other health insurers (many companies in the industry trade at low multiples due to investor uncertainty). Foster Wheeler AG (NASDAQ:FWLT) is dependent on its financials recovering, and so might be better placed on a watch list for now. As for Blue Nile Inc (NASDAQ:NILE), the recent growth rates have been good but the stock seems too aggressively priced to be worth buying at this time.
Disclosure: I own no shares of any stocks mentioned in this article.