Is Obamacare A Wealth Generator? [WellPoint Inc(NYSE:WLP)]

June 17, 2014 11:34am NYSE:FXH NYSE:SYE

ObamaCareWellPoint Inc(NYSE:WLP), the largest provider of Blue Cross Blue Shield in the country, was thought to be a goner when Obamacare came into being. And there were a couple of missteps along the way that drove home that idea for the


Street.

But despite all the doubters, the company has thrived and is up 40% this year and is still only trading at 12 times 2015 earnings. That’s cheap!

There is still a lot of fear in the stock, according to GAMCO Investors, but most see a winner in the insurer.

The price target has been raised to $130 per share from $106. And that will still be a very reasonable 14 times 2015 earnings.

Its focus on individuals and small companies that stand to benefit from the Obama healthcare plan and maintaining commercial sales has pushed the company’s numbers higher and higher.

WellPoint has raised full-year 2014 estimates for the second time this year to $8.50 per share and $9.20 in 2015.

Despite the rough start the exchanges under Obamacare had, WellPoint says its operations in this arena are profitable.

Wellpoint is paying down debt, raising the dividend, buying back stock and flush with cash flow. This is one for the patient, but you will be rewarded.

Think Long Term, Make Money

James Anderson of Baillie Gifford, based in Edinburgh, Scotland, has beaten the broad market by as much as 50% per year for the past decade not just by ignoring short returns but also by buying the favorite stocks of the day, even if they seemed expensive at the time.

And the stocks that have done so well for the past 10 years are described as not being not beholden to quarterly capitalism. That’s the short-term focus almost the entire stock world has on investments: quarterly results.

Anderson says to ignore the short term and look way down the road; five years, at least. He’s owned stocks in his portfolio for 25 years and more.

The average stock mutual fund holds a stock for an average of 18 months.

Anderson says to focus on firms that look to grow in the distant future. Don’t aim for the short term at all. Imagine what a company will look like in the next five years.

You can’t argue with his results. He’s averaged 13.1% a year for the past 10 years while the U.S. market is at only 7.9%. Do the math: That adds up to a lot of money. On average, 50% more a year for the last 10 years!

The market myopia that most stock buyers have pushes them into risky trades that are intended to make a quick score but more often end up losing most of the time.

And the losses resulting from the quarterly approach to money aren’t just at the individual portfolio level. Sixty-five percent of corporate executives surveyed in a recent Stanford study stated that stockholders with a short time horizon make strategic planning more difficult. The pressure to perform on a month-to-month basis causes indirect losses that can’t be measured.

Patience pays! Get a long-term view of your money and start making money for a change.

Still not on board with the long-term view? Did I mention Anderson is one of Warren Buffett’s mentors?

The “Slap in the Face” Award: A Fine Whine

This week the cheek smacker goes to all of us who labor six months a year to pay the IRS, and those wonderful people in Washington who spend it.

The evil tax empire recently won a court case that allows them to charge so much in penalties that the case in question owed more than the total account value on which the suit was based.

A U.S. millionaire, one of their favorite targets, was fined $2.2 million – that’s just the fines, not including the tax and interest – for having an offshore account he did not report.

That’s $2.2 million in fines alone for an account worth – are you ready? – $1.5 million!

And the fear is this will embolden the tax maggots to go after bigger and bigger fish. The sky is the limit, and the IRS has no comment.

The 87-year-old account holder opened the account in the ‘60s with money made outside the U.S. and, yes, he failed to report it as required.

But not only is the penalty completely absurd, it is also unconstitutional. At least that’s what most experts are saying. It falls under the area of excessive fines.

So, if you’re hiding money abroad, either get better at hiding it or, just spend it. It’s better than the penalties.

That of course is a joke… not tax advice.

by Steve McDonald, Bond Strategist

Investment U provides cutting-edge research and strategic financial recommendations for all levels of investors through its morning publication Investment U Daily and its related publications.

Related: First Trust Health Care AlphaDEX Fd(ETF)(NYSEARCA:FXH), SSgA Active ETF Trust(NYSEARCA:SYE), SSgA Active ETF Trust(NYSEARCA:SYV), SPDR Series Trust(NYSEARCA:XHS)


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