i will keep this brief, but i believe fair value here is close to double, or more than the current price. simple reasoning - the biz should earn 13-15c per share, sustainably, from its book of business; could easily afford to pay out most of that as a fully franked dividend; and as such should trade north of 10x earnings, which is basically $1.4 or $1.5 and would imply almost a 10% fully franked yield, still well north of anything else in the non-bank financials space etc. Naturally, the current valuation of around 4x P/E including cash, or under 3x P/E excluding excess cash, is insanely undervalued on any metric anyone would choose to look at and leaves plenty of room to be wrong on many things and yet still generate an excellent return.
i do NOT think it is that difficult to imagine a scenario where capital allocation is massively improved/normalized, post this Abercrombie bid fiasco, but I will leave my views there for now.
going forward, please feel free to interact with me directly on this topic, here or via my other direct channels.
I currently own 11.5mm shares of HUM.
DYODD. GLTA.
HUM Price at posting:
64.0¢ Sentiment: Buy Disclosure: Held
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