Hospital stocks outshone a lackluster performance by most other healthcare stocks during the first half of the year.
Hospital stocks were up 7.3%, while shares among healthcare inpatient and outpatient providers rose just 1.3% during the first six months of 1994, according to WDI Capital Markets, a Hilton Head Island, S.C., research service. Managed-care stocks were the best-performing segment among healthcare providers, registering a 12.7% increase during the period, WDI said. A stellar example was Foundation Health, whose shares are traded on the New York Stock Exchange. Shares in the Sacramento, Calif.-based company closed at $39 on June 30, a 26% rise.
Foundation contributed to its growth curve in June by signing an agreement to buy CareFlorida Health Systems, Miami, in a $250 million stock swap.
On the hospital side, a big gainer was American Medical International, whose share price rose 28% during the first six months. The Dallas-based chain was the subject of takeover rumors during much of June.
Another impressive rise came in the shares of Universal Health Services, which were up 57% to $26.13 at the end of June. Executives of the King of Prussia, Pa.-based chain took the unusual step last month of meeting with Wall Street analysts in New York.
"This may be the first of several analysts' meetings designed to focus attention on UHS shares," said John Hinde-long, healthcare analyst with Donaldson, Lufkin & Jenrette, a New York-based investment banking firm.
He said Universal's shares remain undervalued, trading at five times EBITDA, or earnings before interest, taxes, depreciation and amortization, compared with seven times for the hospital industry segment.
Mr. Hindelong also said hospital stocks in general have benefited from "the gradual meltdown of the radical healthcare revolutions" proposed by the Clinton administration.
Also during the first six months, shares in Columbia/HCA Healthcare Corp., the nation's largest hospital chain, began to recover some ground lost late last year. Between Jan. 1 and the end of June, Columbia/HCA stock was up 13% to $37.50 in NYSE trading. Columbia/HCA shares have continued to rise this month. Last week, the stock price was hovering around $39. That's still under its 52-week high of $45.25.
However, Nashville, Tenn.-based OrNda HealthCorp remained a laggard. The hospital chain's stock price dipped 16% to $13.25 during the first six months.
That prompted one of the company's large shareholders, Donald Freeberg, to call off selling 2.9 million of his OrNda shares (July 11, p. 60).
Other positive stock performance during the first six-month period was recorded by long-term care, in which prices were up 4.8%, and rehabilitation, up 5.7%, according to WDI.
Showing losses were stocks in home healthcare, down 9.6%; imaging operators, down 24.5%; laboratories, down 2.2%; and outpatient providers, down 8.8%, according to WDI.
One company pulling down the home-care sector was Abbey Healthcare Group, whose stock dropped 21% in June to $15.13. The Costa Mesa, Calif.-based company has been hurt by concerns about its ability to integrate its purchase of Total Pharmaceutical Care, Mr. Hindelong said. The company and its former president are suing each other over the deal (July 11, p. 28).