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Opening Segment 1
Title: |
'KNOW YOUR IPO'...
'Profit Motive' |
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. . . .
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Featured Stock(s): |
Triple-S Management
Corp. (GTS)
See Opening Segment 2,
below...
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On Wall Street, nothing's
ever a sure thing...
But some stocks... some
genres... some sectors...
come pretty darn close.
And I've got a brand new
one... A fresh-faced
IPO that came public just
on Friday... and I'm
giving it to you...
In Peter Lynch's first
book... one of our
favorites, if you haven't
read it... very
inspirational and
instrumental to my
career... this is the
fabulous Beating The Street , by Peter
Lynch...
Lynch talks about what he
calls one of the few sure
bets out there... his
words, not mine...
which is betting on the
conversion of a private
savings and loan, into a
public bank.
Peter Lynch - one of the
greatest investors of all
time, with the Magellan
Fund - the reason
why, when I lived in my
car, I still gave money to
him, rather than to home
insurance... This guy made
me and my family a lot of
money, and he was dead
right about these
conversions...
And here on Mad Money, we
have come up with what we
believe is another formula
that we think comes as
close to a sure thing as
what Peter Lynch describes
in Beating The Street...
When you have a
not-for-profit managed
healthcare company that
has the exclusive right to
the Blue Cross, Blue
Shield brand in its state,
and that non-profit
company converts into a
for-profit business, and
comes public, then you've
got a stock that, in my
opinion, is as close to a
guaranteed-to-make-you-money
stock that I could find of
all the 6,000
publicly-traded stocks...
We ran the numbers on the
performance of stocks that
fit this pattern, after
their IPOs... and, for the
first four years, Blue
Cross, Blue Shield
non-profits, converting
into for-profits... they
were up an astounding
average of 28% a year...
28% a year! And
usually the first year was
better than the others!
Maybe this is when we'll
look back... you'll buy it
and you'll say, 'that was
easy'...
. . . .
.
Every one of these stocks
also has something in
common. They ended
up being bought by
WellPoint Inc. (WLP)
for a huge premium!
So far, this formula has
worked every single
time... but the last time
one of these non-profit,
Blue Cross, Blue Shield
affiliates converted into
a for-profit
publicly-traded companies
was five long years ago.
Most of the states where
this hasn't happened yet,
have created a lot of
obstacles to prevent these
organizations from turning
into for-profit
businesses, because they
want to keep their
healthcare on the cheap.
So why do we care about
this formula?...
What do we have here?...
Because, on Friday, a
company called
Triple-S Management
Corp. (GTS),
which was the non-profit
Blue Cross, Blue Shield
affiliate for Puerto Rico
came public, and is now
the for-profit Blue Cross,
Blue Shield affiliate.
Got it?
In other words, it fits
the pattern. It's
the formula all over
again. And I have
total confidence that this
one - just like the others
- should make you a lot of
money, and you'll be
saying, 'that was easy'...
. . . .
.
We've gotten very lucky
here because, so far, GTS
looks like a bit of a
dud...
It was priced at $14.50
for the IPO. That
was well below its initial
range of $16-$18 a share.
It opened only 31 cents
higher...
Obviously, everyone's
forgotten - five long
years - that this formula
works...
Now it's trading at
$15.87, which is still
well below the range.
We love this, because it
means the stock is
probably going to be
ignored... or nobody
cares...
Rarely, have I ever felt
anything Blue Cross or
Blue Shield could be
considered a gift, but
this is surely one of
them.
On this show, we recognize
the potential of this
company, because it fits
into a formula that, so
far, has produced only
winners.
But what makes this
formula so great... we
know it's been working...
but why does it work?
We need to know why it's
been working, if we're
going to stick this stock
on our buy list...
. . . .
.
Here's the playbook for
these companies, when they
switch from non-profit
health insurance
providers, to the
for-profit kind...
This is what all the
others did. It's
what I think GTS is going
to do right now...
These companies all
started out with a bunch
of unprofitable, or barely
profitable, contracts...
That makes sense.
They were non-profits...
But it makes no sense
whatsoever, once you start
trying to make money for
shareholders.
So, what you do if you're
GTS is raise prices on
these unprofitable
contracts to make them
worth your while.
Either your customers take
the new price, or they
walk away... Since they
were losing you money
anyway to begin with, you
become just naturally more
profitable. And, if
you become more
profitable, I believe your
stock will go higher.
That simple playbook over
the next few years, should
allow GTS to grow
incredibly, and to really
fatten up its margins,
it's profitability... buy,
buy, buy!
GTS is replicating, I
think, one of the
single-best stories we
have ever seen in the
business... but we also
have to remember our
discipline... and this is
important... because I
already sense that people
are going wreck this
trade, and I'm not going
to let you...
This is a $450 million
market cap stock. If
you try to pay up for this
stock, in after-hours,
after it was such a dud
last week, I'm pretty
confident that you're
making a mistake... maybe
a big mistake... because I
believe, a week from now,
this stock will have come
back in to where it was
before I did the segment.
That might be a better
entry point...
If you don't use limit
orders, you're going to
get hurt... so please
don't buy it right now...
If you use my one-week
rule, I'll bet you do much
better than if you buy
right now...
. . . .
.
The Bottom Line!:
There are no sure
things with Wall Street,
but Triple-S Management
Corp. (GTS)
comes pretty darn close.
I am beseeching you and
imploring you... If you
choose to buy this, use
limit orders. Put a
$16.50 top... $16.75...
$16.25... I do not
want to hear that you
bought it on a market
order at $18, and
therefore you think Jim,
how could you hurt me?...
[See Jim's 2nd Opening
Segment stock picks
below... ]
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