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Anthem Has Become Interesting Again

Summary

As it has become apparent that the deal with Cigna will probably be cancelled, Anthem has lost about 25% off its peak.

However, as soon as the deal is cancelled, Anthem is likely to resume its aggressive share repurchases.

Moreover, at its current stock price, it is pronouncedly cheaply valued.

Anthem (NYSE:ANTM) was one of my greatest stock picks. As it was trading at a pronouncedly low, single-digit P/E ratio in 2013, I purchased it at $75 back then. Then the market started to appreciate the stock and thus I sold it at $128 only a year later, at a 70% profit. I sold the stock because it approached full valuation while I always appreciate it when the market offers me so extraordinary returns in such a short period. As it turned out, I sold the stock too early, as it reached a peak of $168 last summer. Nevertheless, the stock has lost about 25% since then and hence it has now returned to my previous exit point. In this article, I will detail why Anthem has become undervalued again.

The main reason for the extended rally of the stock up to its above mentioned peak was the enthusiasm over the announced acquisition of Cigna (NYSE:CI). The merger between the two of the top five health insurers would result in great synergies and would thus be highly accretive to the earnings per share [EPS] of the resultant giant. However, in the last few weeks, it has become apparent that the deal is not likely to materialize, as the Department of Justice has...


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