Bottom Line/Personal: I’m Steven Kaye, editorial director of Bottom Line Publications, and this is Bottom Line On Your Money, where our experts help you create, invest and protect your wealth.
Today I’m speaking with Vahan Janjigian, PhD, CFA. Vahan is editor of the MoneyMasters Stock Report newsletter, chief investment officer at Greenwich Wealth Management and author of two books, including Even Buffett Isn’t Perfect. Vahan previously served as editor of the Forbes Special Situation Survey newsletter, where he was ranked the number-one stock picker by Hulbert Interactive for the decade ending in December 2012.
Vahan, you’re known as a stock picker, so I can’t let you go without asking you to tell us about a stock you currently like and why.
Vahan Janjigian, PhD, CFA: Well, one of my most recent recommendations is a company called Amedisys, ticker symbol AMED. This is a small-cap company that’s actually smaller than most stocks I recommend, but I really liked this company because it was tremendously undervalued when I discovered it. It has run up quite a bit since my recommendation—it ran up more than I expected quickly, but I still think that it’s a great long-term play.
Amedisys is in the home health business, so this is a company that will send out home health aides to people’s homes when they are ill or when they’re recovering from some type of surgery. Most of their patients are elderly and most of their patients are on Medicare, so the company does receive the vast majority of its revenues from the government, from Medicare.
And that could be a risky situation, but interestingly, I think it’s a company that actually saves taxpayers money, because if Amedisys and companies like Amedisys did not exist, these patients would not be in their homes—they would be in the hospitals, and it would be costing the taxpayers even more.
This is a company that’s a demographic play. In the United States, we have an aging population. Baby boomers are retiring every day. We’re seeing more and more elderly, and these are the kinds of people that are going to require the services that Amedisys provides. So I think it’s a great long-term play. I also think the stock is very good value at this point.
Bottom Line: What was it that pushed Amedisys down into that value territory that you like to be in? You can see here on the chart when you bought it and the increase since then, so why that valuation?
Janjigian: Because, as I mentioned, they receive so much of their revenues from the government, it’s the kind of company that has always being accused of overbilling. The government accused a number of home health companies of overbilling. There was an investigation. Amedisys chose to settle. The SEC was investigating the company, and the SEC decided that no action was required.
I was surprised that, after all this, the stock did not really jump up as much as I expected, so I decided it was a good time to recommend the stock. And eventually, investors came around and realized that the company does provide a great service…it is saving taxpayers money…and it’s undervalued. So it’s been running up ever since.
Bottom Line: Easy business to get into? Hard business to get into?
Janjigian: Well, they do have competitors, and of course, just about any company can go into this business. But it’s an important business, and it’s a growing business, and in fact, the home health jobs are one of the fastest-growing jobs. They’re not very high-paying jobs, so the company’s costs are relatively low, but there’s a big demand for these kinds of people.
Bottom Line: If Obamacare is rolled back, or part of it is rolled back, or if there’s any other big change in the landscape for health care, how does Amedisys sit?
Janjigian: Of course, Amedisys gets its revenues from the government, and they’re trying to diversify their revenue source, and they’re starting to get a little bit more from private insurers. But if we have a situation where Medicare coverage is cut or Obamacare is really cut back, then, of course, the company might suffer.
Bottom Line: OK, so that’s the story on Amedisys. You can see what it’s done recently in price. Thanks very much, Vahan.
Janjigian: Thank you, Steve.
