Health Management Associates Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of hospital and health-care facility operator Health Management Associates (NYS: HMA) swooned by as much as 12% earlier in the trading session following negative analyst comments about the sector last week.

So what: Today's move lower appears to be a carryover effect from last week when Citi analyst Gary Taylor downgraded eight hospital operators. His reasoning relates to the need for Congress to reduce the budget deficit and his assertion that Medicare is going to be one area that gets hit hard by spending cuts.

Now what: Shareholders of Health Management should at least feel some relief because their company was spared the ominous sell rating from Taylor. However, that didn't stop the analyst from downgrading four of the eight to sell. Until the 2012 elections are over, it's very difficult to tell what's going to happen with regard to future budget cuts. At just eight times forward earnings, Health Management appears cheap, but Medicare cuts would likely send the stock lower in a hurry. I'm more than happy being a spectator to the hospital sector at the moment.

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At the time this article was published Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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