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Express Scripts on Anthem Threat
Posted by Eddy Elfenbein on January 13th, 2016 at 11:45 amShares of Express Scripts (ESRX) are down today after Anthem (ANTM) threatened to ditch Express unless they can pass along savings of $3 billion a year.
Taking a contract dispute between the two companies public, Anthem Chief Executive Officer Joseph Swedish said Tuesday that Express Scripts should be passing along more of the savings it negotiates from drugmakers. If it doesn’t, the health insurer may look for another pharmacy partner. Express Scripts disputed Swedish’s description of the terms between the two companies, and the $3 billion figure.
“We are entitled to improved pharmaceutical pricing that equates to an annual value capture of more than $3 billion,” Swedish told investors Tuesday at the J.P. Morgan Health Care Conference. “To be clear, this is the amount by which we would be overpaying for pharmaceuticals on an annual basis.” Much of those savings would be passed on to clients, he said.
Anthem and Express Scripts have an unusual arrangement that stems from Anthem’s sale of its pharmacy-benefits business to Express Scripts in 2009. The insurer is entitled to periodic reviews of how much it pays for drugs, a process the companies last went through in 2012. They haven’t yet reached a deal on the most recent talks.
Express has countered:
“Express Scripts has consistently acted in good faith and is in full compliance with the terms of its agreement,” said Brian Henry, a spokesman for the company. “While the contract calls for good faith negotiations regarding a pricing review, it does not mandate specific price adjustments. Furthermore, Anthem is not entitled to $3 billion.”
My take: The $3 billion number is nuts. It’s a negotiating tactic. They’ll reach a deal because they need to reach a deal. Ironically, if ANTM wasn’t interested, they wouldn’t be so vocal right now.
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JM Keynes: Currency Trader
Posted by Eddy Elfenbein on January 13th, 2016 at 8:40 amFrom Neil Irwin at the NYT:
But winning big in currencies is harder than it looks — even if you happen to be one of history’s greatest economic thinkers.
That’s the conclusion two scholars reached after scouring the records of John Maynard Keynes, the British economist who, when he wasn’t advancing economic thought in the 1920s and 1930s, spent a great deal of time investing in stocks and currencies. At the peak in 1936, Keynes had more than 250,000 pounds invested, the equivalent of $23 million today.
But even while writing a treatise that would be one of the foundational texts of 20th-century economics (“The General Theory of Employment, Interest and Money,” published in 1936) and hobnobbing at the highest levels of global finance, his returns were pretty, well, mediocre. He had an average annual return of 8.9 percent from 1920 to 1927, and a mere 2.5 percent from 1932 to 1939, according to research by Olivier Accominotti of the London School of Economics and David Chambers of the Cambridge Judge Business School newly published in The Journal of Economic History.
(…)
Keynes bet that the United States dollar would appreciate — just before Franklin Delano Roosevelt abandoned the gold standard in 1933, a move that caused the dollar to lose value. Keynes did correctly predict that France and the Netherlands would eventually abandon the gold standard in the 1930s, leading to declines in the franc and guilder. But he was early, and so incurred years of losses on the trade before his economic foresight paid off.
“In many cases he called currencies right in terms of direction,” Mr. Chambers said. “But his great frustration was how to time a trading position. That was the thing he found most difficult.”
This is a good point about investing: even if you’re right on the big picture, you still need to get the timing right. In The Big Short, the guys were right but they had to wait and wait and suffer big losses until they hit their payday.
From the final day of trading in 1986 until April 12, 1988, the Dow gained 11.3%. True, it wasn’t in a straight line.
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Morning News: January 13, 2016
Posted by Eddy Elfenbein on January 13th, 2016 at 6:33 amGundlach Paints Bearish Outlook for 2016 Investing, Economy
Oil Rebounds From Below $30 as Threat of Further Drop Persists
Chinese Exports Post First Annual Decline Since 2009
China Trade Surprise Brings Relief
Russia Mulls Budget Cuts and Bank Stake Sales
Nigeria State Oil Company Holds First IPO by 2018
MetLife Unit’s SIFI Off-Ramp Seen Pressuring AIG as Icahn Looms
Yum Shares Rise After December Gain in China Same-Store Sales
PC Sales Drop To Historic Lows
Qualcomm, TDK Join Forces in $3 Billion Radio-Chip Venture
Big Beer’s Plan to Sell to Consumers Who Hate Them
’Bellwether’ G.M. Trial Opens Over Defect Claim
Cullen Roche: The Bear Market Playbook
Jeff Carter: What Skills Will People Need In The Future?
Be sure to follow me on Twitter.
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Our Buy List Nearly Doubled the Market Today
Posted by Eddy Elfenbein on January 12th, 2016 at 5:02 pmToday was an excellent day for our Buy List. Of course, I stress the benefits of looking at the long-term so we shouldn’t get too excited about one good day. But it was a very good day. Our Buy List gained 1.54% today which nearly doubled the S&P 500’s gain of 0.78%.
Seven trading days into the year, we’ve opened up a small lead against the overall market. Or more accurately, we’re down but not by quite as much. Through today, our Buy List is down 4.02% YTD compared with a loss of 5.14% for the S&P 500.
Cognizant Technology Solutions (CTSH) was our top performer today. The stock gained 6.28% in today’s session. There’s been some horrible flooding in India and Cognizant wanted to update investors on their status. The good news is that Cognizant won’t be financially impacted by the floods. The company reiterated their 2015 full-year guidance for earnings of at least $3.03 per share. That means they expect Q4 earnings of at least 77 cents per share.
“Cognizant extends its gratitude to its employees, business partners, government agencies, and others involved in recovery efforts that helped in quickly bringing our business operations back to normal,” said Gordon Coburn, President of Cognizant. “We are also grateful to our clients for their understanding of the circumstances, and their support of our Business Continuity Plan actions taken during the flood to successfully ensure continued delivery of services.”
After the closing bell, Ford Motor (F) announced a special 25 cent dividend. This is on top of their regular 15 cent quarterly dividend. The dividend will be paid on March 1 to shareholders of record on January 29. The automaker also said it expects record profits for 2015 and equal or better profits for 2016. The stock is down about 3% in the after-hours market.
Also after the bell, Stryker (SYK) narrowed its full-year range for 2015. The previous range was $5.07 to $5.12 per share. Now it’s $5.09 to $5.12 per share. This is the third revision to their full-year range. The initial guidance was for $4.90 to $5.10 per share, then it went to $5.06 to $5.12 per share. Earnings are due out on January 26.
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High Yielding Dividend Aristocrats
Posted by Eddy Elfenbein on January 12th, 2016 at 2:06 pmThanks to the recent market selloff, many good stocks are going for decent prices. Here’s a list of Dividend Aristocrats that are currently yielding over 3%. To become a Dividend Aristocrat, a company needs to have raised its dividend for the past 25 years in a row.
Eddy Elfenbein is a Washington, DC-based speaker, portfolio manager and editor of the blog Crossing Wall Street. His