Medco Health Solutions Soars on Strong Guidance for 2011
Medco Health Solutions (MHS) is a leading pharmacy benefit management provider and a recent addition to the Net Payout Yields Portfolio (available from Covestor.com soon). How could an investor have predicted strong earnings and the incredible recovery in the stock of MHS from a low of below $44 at the end of August to the $57 current price in 2 months? Well, actually rather easily because MHS spent Q1 and Q2 buying some 8% of their outstanding stock. Management signaled that the stock was too cheap in the mid $50 range so why were investors so reluctant to buy in the $40s. Good question to us. During the last quarter they bought another 4% of the outstanding stock placing the Net Payout Yield at 12.7% based on current stock price. Or a nearly 17% annualized run rate since this total only factors in the last 3 quarters. During Q3, MHS bought back $903M or 17.1M shares of stock. The unfortunate news is that it appears management was unable to purchase shares in the $40s when th...