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Humana Inc. Message Board

  • delta2j delta2j Jan 3, 2000 11:59 AM Flag

    What 's meaning of "evaluate goodwill?"

    What does it mean to evaluate goodwill and why does it cost money?

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    • be fair. just a short time ago you were talking
      about this be fairly valued at $5-6. the market is
      clearly looking ahead to better times. no maybe not
      overnight, but given this week's "news," and the market's
      reaction, i think we can say we've seen the lows and the
      downtrend began at 30ish is over.

      don't think you
      views were ever that "off," as i've said before, but i
      think it's fair to acknowledge that the "trend" is
      changing for hum. fair?


    • to occur until the second half of the year at the
      earliest.HUM has taken steps aimed at boosting short-term
      profits even at the risk of losing enrollment.They are
      clearly positioning the company for sale and seem to
      believe the stock should be trading around $18 or so.I
      guess the question is can they achieve enough
      improvement in short-term earnings to get the stock back up
      to the $10 to $14 range and then get a 40 to 50
      percent premium on top of that.That would put a HUM
      buyout anywhere from $15 to $21 per share.They face an
      uphill battle because their P/E ratio is already fairly
      high relative to the other HMO stocks and medical
      costs are rising fast throughout the industry.I expect
      them to get an upgrade by a brokerage firm to help
      boost the stock price prior to any sale.This could
      easily be a an 18 month time frame.

    • o.t. we continue to think alike. in wmi at an
      average of 15 3/4. just added more wm at 23 7/8
      yesterday, though i acknowledge that since it's hitting new
      lows, it could go lower (remember cd, i though 9 was an
      unbelievable bargain, come to think of it it was!) will lokk
      forward to your commentary after reading. take


    • Can you tell me about Thompson and how it tells
      about instituional buys? I also own
      SRV as a bottom
      fish along with NCSS and RAD.
      Any thoughts on these
      (and HUM my largest postion) are welcome. I do not
      receive VL nodays but subcribed back in the old paper
      days of the the '80 and made money on their 4's.

    • There was considerable buying interest
      Humana stock today by the institutions.
      My data comes
      from Thompson I watch which
      showed Super buy
      interest messages
      all day long. I personally watched
      buy orders all day long on my level 11
      screen. I
      just received the latest
      Value Line Survey review
      of Humana
      yesterday. I plan to review it
      and I will post my thoughts tomorrow.
      I did notice
      the stock had moved up
      a notch to 4 or below
      average performer
      next year from a 5 with was
      previous ranking and the worst
      performance rank they
      I was out this a few hours this
      afternoon and
      could not believe the
      carnage in the markets! Zim, I
      been bottom fishing in Xerox,Lockheed
      Management,Goodyear, and
      Washington Mutual. I am looking
      buying shares of Service Corp also.
      Value Line has
      just put it into the
      long term recommended
      portfilio. Looks
      like they might get some
      (death) after today's drop in the
      market. HA. I'll let
      you know
      what Value Line says tomorrow!

    • goodwill are the intangibles which show up in the
      book value....if you buy a restaurant for 500k that
      has real estate worth 100k, equipment worth 100k &
      inventory worth 100k, you paid 200k more than the
      "component value". from an accounting standpoint, the extra
      200k is known as good will, its the value of the
      reputation of the restaurant, secrect recipies, etc...the
      non-tangible items that you pay for.

      as other posters
      have stated, writing down Goodwill can sometimes be a
      pre-requisite to selling your company...

      i'm not an
      accountant, but goodwill gets depreciated (i think) which can
      be helpful, but it also goes against your
      assests...if you have lots of goodwill on the books, it will
      lower your ROA - a critical evaluation tool for mature
      businesses. if i'm buying HUM, i don't want inflated goodwill
      on the books to dilute my ROA....

      • 2 Replies to golfNvester
      • goodwill in this case may mean that HUM is giving
        up the investment income that the assets of the
        insurance company was generating and/or perhaps having to
        pay the tax liabilities that would otherwise be
        deferred that these companies sometimes have.

        wants the money now eventhough this work comp entity
        has been contributing a significant percentage of
        HUM's earnings over the last few quarters from reserve
        takedowns - very unlike the sit with the CA HMOs.

      • Here is a piece:

        "Nevertheless, the
        trial lawyers don't really care that these "novel legal
        theories" are unlikely to hold up in court. In September,
        Maio v. Aetna, the RICO suit that was hoped would be a
        model run, was dismissed by a federal district judge in
        Pennsylvania. The suit alleged that all six million or so
        people currently receiving their medical treatment from
        Aetna were the victims of a vast fraud. Writing in the
        dismissal, Judge John Fullam remarked that the "vague
        allegation that 'quality of care' may suffer in the future
        is too hypothetical an injury to confer standing
        upon plaintiffs."

        With the other RICO suits in
        the mill, the trial lawyers are doing their best to
        use the court of public opinion and the threat of
        complete financial meltdown to get the HMOs to settle.
        Since October, trial lawyers have sought to create a
        market selloff of managed care stocks in order to force
        out-of-court settlements.

        Mr. Scruggs has been on the
        front lines of the stratagem--cozying up to analysts at
        Morgan Stanley and Prudential, as well as popping up on
        conference calls for institutional investors to educate them
        about the potentially dire outcome of the lawsuits. "If
        HMO investors were smart," he said recently, "they'd
        lean on their companies to see if we can work
        something out." Since the suits were announced, most of the
        managed care stocks have slumped to half their 1999

    • PAX did a lot of these write downs before
      announcing the sale to NBC.

      The move looks to be
      cleaning off some more of the rotten "cheese". Evaluating
      goodwill means they paid too much for a past

      I've been playing with the SmartMoney Market map.
      Food, Health Care, Utilities are all down sectors by at
      least 40% since 990101. So I've been bottom fishing for
      some three baggers.

      The rules have changed so
      much in Utilities I'm confused so I'm staying

      I can't see loosing money on HUM, RAD, or KR as the
      cycle swings this year. So I'm jumping in.


      • 2 Replies to Healing_Hands41M
      • with you, zimmer and other Longs that investing
        in Humana at this price is a golden opportunity
        probably to double your money in 2000.

        The positive
        news today was misinterpreted by small investors who
        sold whilst smart money was picking up shares on the
        cheap: the daily chart shows the volume on the upside
        was 2 or 3 times at least that on the downside.
        Already institutions own more than 80% of HUM

        I have also bought RAD near 11$ and will buy more
        if the price remains below 12$. KR is probably a
        share I should be buying too.

      • Just making themselves more appealing to another
        HMO. Dumping Casualty and Property business (as CI
        did) -- selling off worker comp -- taking big charge
        that will make them more of an earnings boost for an
        acquirer (example: think about what the businesses Tyco
        bought recently did). Might it happen even sooner than
        the 3rd qtr?

181.52-0.64(-0.35%)Sep 4 4:03 PMEDT