The
stock market was largely flat.
Dan
Caplinger (TMFGalagan) Dec 9, 2019 at 12:01PM
Dan
Caplinger has been a contract writer for the Motley Fool since 2006. As the
Fool's Director of Investment Planning, Dan oversees much of the
personal-finance and investment-planning content published daily on Fool.com.
With a background as an estate-planning attorney and independent financial
consultant, Dan's articles are based on more than 20 years of experience from
all angles of the financial world.
Major
benchmarks stayed pretty close to unchanged on Monday morning, hanging on to
their substantial gains on Friday. Optimism about the November employment
report continued to make market participants happy about the likelihood for
continued gains in stocks going through the end of the year. As of 11:30 a.m.
EST, the Dow Jones Industrial Average (DJINDICES:^DJI) was down 54 points to 27,961.
The S&P 500 (SNPINDEX:^GSPC) fell 1 point to 3,145, and the
Nasdaq Composite (NASDAQINDEX:^IXIC) fell 1 points to 8,656.
There was
a lot of action on the merger and acquisition front Monday, and UnitedHealth
Group (NYSE:UNH) looks like it might have picked up a
sweet deal. Meanwhile, Chevron (NYSE:CVX)
got some criticism about its overall corporate strategy, but shareholders
didn't panic about the news.
UnitedHealth
looks to buy Diplomat
Shares of
UnitedHealth Group were down a fraction of a percent after the health insurance
and wellness giant said that it would make an acquisition. The company's
OptumRx pharmacy business has made a bid to buy Diplomat Pharmacy (NYSE:DPLO) in response to a difficult
situation at Diplomat.
Under the
terms of the deal, UnitedHealth will pay $300 million for Diplomat. That
amounts to just $4 per share, which is well below the $5.81 per share that
Diplomat stock fetched at the close last Friday.
Diplomat had told investors in November that
it had lost a large customer in its pharmacy benefit management business, and
that created significant risk in handling its outstanding debt. Shareholders
were nervous that Diplomat might have to declare bankruptcy, hoping for a deal
like this one to rescue the company.
For
UnitedHealth, the move brings OptumRx additional expertise in handling
specialty medications, especially for patients suffering from cancer and immune
diseases. Going forward, UnitedHealth can expect to benefit from Diplomat's
misfortune, and it looks like the healthcare giant got a good price in the
deal.
Chevron
gets downgraded
Shares of
Chevron were also little changed on Monday morning after Wall Street analysts
weighed in with somewhat downbeat comments about the energy stock. Citi Research downgraded Chevron
from buy to neutral, cutting its price target by $15 to $120 per share.
The move
comes amid concerns that Chevron has used up a margin of safety that it had
built up in past years. Citi said that Chevron had previously looked more
attractive than many of its oil industry peers, with efforts to use its money
wisely in investing in new projects. Now, though, it's unclear whether Chevron
will be able to keep up that track record, as it's facing some new challenges
and hasn't achieved all of the results that many investors have wanted to see.
Moreover,
the energy markets have been stubbornly weak. Even with a solid gain late last
week, crude oil remains below $60 per barrel, and advances in production
capacity across the industry aren't exactly bullish for the future.
Chevron
remains a solid company, and its 4% dividend yield looks attractive. But until
the energy market recovers, some will question whether Chevron can produce
truly stellar returns for shareholders.
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Dan Caplinger has no position in any of the
stocks mentioned. The Motley Fool recommends Diplomat Pharmacy and UnitedHealth
Group. The Motley Fool has a disclosure
policy.
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