Universal American Corporation (UAM): Camber Capital Management Resumes Buying Shares

Stephen DuboisCamber Capital Management is again increasing its stakes in Universal American Corporation (NYSE:UAM). Camber Capital Management’s recent filing with the Securities and Exchange Commission (SEC) show that the fund increased its stake to over 4.56 million shares in Universal American Corporation (NYSE:UAM) from the over 4.17 million shares that it held earlier. With this purchase, Camber Capital Management now owns 5.58% of all common stock of the company as a passive investor.

Universal American Corporation

Camber Capital Management initiated a stake in Universal American Corporation (NYSE:UAM) during the first quarter of 2013 by purchasing over 340,000 shares of the company. Since then, Camber Capital Management has continuously increased its stake in the company quarter after quarter except the second quarter of this year. Camber Capital currently manages an equity portfolio of over $1.5 billion and primarily invests in healthcare companies. Apart from Universal American Corporation, the fund also recently increased its stake in Volcano Corporation (NASDAQ:VOLC) to 5.02 million shares, and in Orthofix International NV (NASDAQ:OFIX) to 1.2 million shares. Other major holdings of the fund include WellPoint Inc (NYSE:WLP), which is up around 30% year over year, and Quest Diagnostics Inc (NYSE:DGX), which has relatively remained flat since last year.

Universal American Corporation (NYSE:UAM) is a $675 million market cap, health insurance company. For the second quarter of 2014, the company reported total revenue of $519.4 million and a negative EPS of $0.12, compared to total revenue of $534 million and negative EPS of $1.05 in the same period, last year. The company current trades at trailing price to sales ratio of 0.31, compared to industry average of 0.51.

Other major institutional investors who are bullish on Universal American Corporation (NYSE:UAM) are Kevin Kotler’s Broadfin Capital and James E. Flynn’s Deerfield Management. During the second quarter, Broadfin Capital increased its stake by 183% to over 2.48 million shares, while Deerfield Management increased its stake by 26% to over 5.77 million shares. Most analysts and brokerages have a ‘Hold’ rating on the stock, with an average price target of $8.24. On August 12, Leerink Swann raised its price target on the stock from $7.5 to $8, and on October 13 Zacks raised its rating from ‘Underperform’ to ‘Neutral’ while keeping the price target flat at $8.20.

Several sector-specific funds becoming bullish on a company often results in good outcome for the investors in the stock. Whereas a regular investor doesn’t have the required means to properly research a company before commiting money, hedge funds put their money in a stock only after thoroughly analyzing it and getting convinced that it’s going to perform nicely over time.

Disclosure: None