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Tenet Healthcare May Benefit From Obamacare

Stocks in this article: THC UNH CI WLP

As of Dec. 31, it operated 50 hospitals, including four academic medical centers and one critical access hospital, with a combined total of 13,453 licensed beds primarily serving urban and suburban communities in 11 states of the United States; and 98 diagnostic imaging centers, ambulatory surgery centers, and urgent care centers, as well as one emergency department in 12 states of the United States. Tenet was founded in 1967 and is headquartered in Dallas. (The preceding comes from the Yahoo! Finance profile.)

Factors to Consider

Technical Indicators Provided by Barchart.com:

The stock now rates both a 100% Barchart technical buy signal and a Trend Spotter buy signal. The price is above its 20-, 50- and 100-day moving averages, hit seven new highs and is up 8.52% in the last month. Barchart.com computes a technical support level at $23.38, and the stock has a 14-day Relative Strength Index of 64.11%. It recently traded at $26.87 with a 50-day moving average of 23.68.

Fundamental Factors:

With risk comes reward, and in the past bad debts from the uninsured have hit the bottom line. TheStreet rated the stock a D+, and the financial strength was a low C. Although Wall Street analysts think revenue will be down 3.80% this year, they expect revenue to be up 3.7% next year.

Earnings estimates are the bright spot, and a 60.1% increase in earnings is forecast for this year, followed by another 11.8% increase next year. Earnings are expected to increase by 11.73% annually for the next five years. The price-to-earnings ratio is a reasonable 17.51 in a 15 P/E market. Analysts think if their numbers are correct, investors could see an annual total return in the 25% - 30% range over the next five years.

Investor Interest:

Wall Street brokerage firms are following this stock, and 14 firms have assigned 21 analysts to monitor the numbers. They have released three strong buy, two buy and 16 hold recommendations on this stock. The individual investor over on Motley Fool has given the stock an 84% vote of confidence to beat the market. Short interest has been climbing recently, to more than 8.5 million shares, and I think the recent price movement will cause a lot of short-sellers to cover their positions.

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