Saturday, July 29, 2006

Aetna in the bargain bin

In a post around a week ago, I had said that Aetna (AET) was moderately attractive, compared to others in the sector that had recently fallen into the bargain bin.

It didn't take that long for Aetna to join the party. The stock has fallen hard this past week due to disappointing earnings news and forecasts. At around $32/share, Aetna is now extremely attractive and trades just above cash/share.

Aetna has long been seen as an acquirer rather than a target. But with this pullback Aetna may itself become a prey. The company will have to do something to thwart such a possibility by either announcing a massive buyback program or a substantial increase in dividends given that the current payout is measly. It may also adopt a poison pill but I hope that route is not taken.

Bottomline - it is time to buy Aetna shares.


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