Universal American Shares Dropped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of health insurer Universal American (NYSE: UAM  ) looked like they needed a trip to the emergency room as they bled out as much as 18% after the company announced a sizable acquisition.

So what: Universal announced today that it's buying privately held APS Healthcare for $227.5 million. APS is a health management company that Universal hopes will help it expand its reach in government-funded health-care programs. Specifically, it's hoped that the combined company will be able to win more business with "dual eligibles" -- that is, patients that qualify for both Medicare and Medicaid.

Now what: A given investors' reaction to the deal may depend largely on why they invested in Universal in the first place. The acquisition is far from ideal for investors that have flocked to the company because they viewed it as a near-term buyout candidate; it less likely that a buyer will step in soon.

For investors that bought with a longer view, the move could be good news if it does help Universal win more lucrative business. Of course for the sub-$1-billion Universal, a $228 million purchase is no small matter, so investors should keep a close watch to make sure that management hasn't bitten off more than it can chew.

Want to keep up to date on Universal American? Add it to your watchlist.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1756620, ~/Articles/ArticleHandler.aspx, 11/28/2014 7:36:25 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Apple's next smart device (warning, it may shock you

Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Advertisement