Out Fox The $treet

--> This model was up 4.8% in August versus a 2.0% gain for the benchmark S&P 500. The model rebounded sharply from a weak performance in July. Trades As mentioned previously, one goal of this model is to slowly trim the amount of positions back closer to 20 after reaching 26 a few months back due to mergers and partial positions. Hence, the model only made a sell during August to reduce the position total down to 24. Express Scripts (ESRX) was sold as the merger with Medco Health (MHS) led to the reduction of share buybacks. Considering the company doesn’t pay dividends, it left the Net Payout Yield (NPY) heading towards zero. The stock was sold at $62.49 on the spike higher following strong earnings. This sell further highlights the ability of the model to be opportunistic when a position no longer meets the set criteria. Instead of having a rigid sell point at a quarter end, the model is able to trade positions when the market presents an ideal time. ...

This model gained a solid 0.8% in April versus a 0.7% loss for the benchmark S&P 500. The model remained strong all month even as the SP500 fluctuated all month. Trade No trades were made in the month of April as existing positions continued to work well with high yields. Top Performers Considering the market was slightly down and the model was only slightly up, not many positions had outside moves. The biggest gainers were Gap (GPS), Travelers (TRV) , and Chubb (CB). All three companies had very strong earnings partially helped out by the large buyback programs over the last year. Bottom Performers Just as with the top performers, not many stocks had outside negative moves in the month. The biggest losers were Conoco Phillips (COP), Goldman Sachs (GS) and Wellpoint (WLP) with all three companies losing more than 5%. Conoco Phillips had disappointing earnings that naturally pushed down the stock. The other two had surprisingly good earnings eve...

Finally the merger of Express Scripts (ESRX) and Medco Health (MHS) closed today . It took since last July to close the merger and any investors holding on this period had limited gains. See graph below nothing the Medco stock closed around $67 around the announcement and only recently reclaimed those levels. Unfortunately our Net Payout Yields model held onto the stock for that period, but at least the end result has been positive. As of the close today, each original Medco share would be worth $73.75.  Now the key to holding Express Scripts going forward will be whether the combined company continues funding huge dividends and buybacks. See our previous blog post after the original announcement. Details from the PR: Following consummation of the acquisition, each share of pre-closing Medco common stock was converted into (i) the right to receive $28.80 in cash, without interest and (ii) 0.81 shares of common stock of the new Express Scripts The company expects syn...

Great news for one of the weakest stocks in our Net Payout Yield model. Express Scripts (ESRX) agreed to purchase MedcoHealth Solutions (MHS) for $29B. The deal gives MHS shareholders $71.36 based on the closing prices on 7/20 amounting to $28.8 in cash and 0.81 shares of ESRX. Considering ESRX is up 6% today the value of the deal got much more attractive now worth nearly $74. Oddly though, MHS has only traded up to around $65 most of the day. The nearly $9 gap suggests the market is concerned about the deal not completing. Anti-trust issues could pop up as the combined company will be a nearly $60B behemoth in the pharmacy benefits sector.  Interestingly though ESRX shareholders are excited enough about the deal to send their shares much higher. Maybe investors just aren't that good with math and are missing the share rise of ESRX and subsequent increase in the value to MHS shares in the deal. The combined company is promising to lead the effort to lower costs of prescription ...