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News that a group of prominent attorneys planned to go after the HMO industry with class-action lawsuits caused shares of Wellpoint Health Networks Inc. to plummet at the end of September.
In the course of a couple of days, the Thousand Oaks company’s stock hit a 52-week low of $48.25, off 49 percent from its high of $97 in mid-June.
The sell-off left executives of the Thousand Oaks managed care company a bit perplexed. The HMO business, the target of the class-action lawyers, represents only 25 percent of Wellpoint’s business. Meanwhile, the company has continued to deliver strong earnings growth to shareholders.
“It was very disappointing,” recalls Leonard D. Schaeffer, chairman and chief executive. “The fundamentals of the company never changed. We’ve committed to delivering 15 percent compounded earnings growth, and we have.”
If Wellpoint was looking for proof the sell-off was an overreaction, officials didn’t have to wait long. The company’s stock has powered its way back to around $68 a share, a 41 percent increase from its low ebb, and analysts appear bullish about its long-term prospects.
Kenneth Abramowitz, an analyst with Sanford C. Bernstein
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