Quarterly Update: WLP, Cisco and JOE

Wellpoint (WLP) announced they earned $2.15 per share, including investment gains, versus $1.90 in the same quarter last year. They lost 2% membership in the last quarter. And WLP has a high medical expense ratio at 85%. All this needs to improve under the yet to be named new CEO.

WLP is my second largest holding and I wouldn't start selling any shares until it goes over $70. And then I would only sell to have a smaller exposure, not because I am trading the stock or that I don't believe in it.

Cisco announced they earned $0.39 per share. That is an 18% increase over the same quarter last year. Their overall revenue increased 6%. Cisco paid $0.14 in dividends. At the moment before the announcement the stock traded at $16.80. But this news was definite surprise as the stock has since jumped 10%. I have had Cisco for over a decade. I have recently wanted to close this position, but as I mentioned in a previous post, the valuation always draws me back. I have bought the stock many times when it was very undervalued, and then sold after a 10-20% gain. The idea is to reduce the exposure when the stock goes up, until zero if the share price is high enough. I don't want Cisco to be a long term investment anymore because I generally do not like technology. Technology is just too unpredictable. I cannot do a basic analysis of the financials and make a high probability bet on a good return. But Cisco right now is simply too undervalued. They have over $10 per share in cash and short term investments. They are increasing revenues and earnings.

As far as I can tell, Cisco is so undervalued because it is no longer in vogue. Their story is they sell the backbone of the internet to the world. They have done this very well for the last decade. But the stock has declined to 1/4 of its high, because that story is old. The market wants to hear about things like personal devices, the cloud and emerging technologies. I want Cisco to chase those only if they can give back a good return on investment. Short of that, I prefer Cisco to buy back shares and keep dominating the backbone. I don't think the market gives Cisco enough credit for still being in the same position as it did during it's heyday; i.e., owning 3/4 of the router market. But one day, something will happen that will make the market perceive that Cisco is hot again, something like a sea change in opinion like with cigarette companies in the last 10 years.

St. Joe (JOE) announced quarterly earnings that was very well received by the market. The company simply eked out a small profit and that was enough. I read they sold some non-strategic land for $5655 per acre. That gives me an idea of the prices they would fetch for their lower end land right now. Given that they have over 500,000 acres, their book value appears to be more than the market cap of about $2 billion. As I said in a previous article, JOE is a simple play on land for me. I bet Berkowitz, who is chairman of the board, can stem the drop in the stock price and turn the company around. So far it is working.