This post is part of a special annual report -- Top Stock Picks '09 -- in which TheStockAdvisors.com asked 75 leading newsletter advisors to select their favorite investment for the new year.
"HMS Holdings Corp. (NASDAQ: HMSY), which makes its money by correcting errors in Medicaid payments and recovering misspent money, is my top pick for 2009," says growth stock specialist Dave Dyer.
In his Dave Dyer's Newsletter, he explains, "This is a company whose fundamentals appear to improve as the economy declines.
"If you think that the unemployment rate will rise in 2009, then you ought to love HMS Holdings. They recently raised their 2009 guidance because they expect higher unemployment.
"The company stated that the unemployment rate is the most important leading indicator of growth in the Medicaid program, which in turn, is one of the most important drivers of their revenue.
"Medicaid is funded by the federal government and administered by the individual states. With 40 of the 50 states under contract, HMSY essentially has a monopoly in this market.
"HMSY is not specifically looking for fraud. One of the commonest errors they find is that a Medicaid recipient may already be covered by another insurance policy.
"HMSY has a large proprietary database of all Americans with insurance coverage and they mine this to find errors. The company gets a portion of the amounts recovered, so the more errors they find, the more money they make.
"Over the last three quarters, the rate of revenue growth has accelerated from 21%, to 26%, and 30% in the most recent quarter. The rate of EPS growth has also accelerated: 9%, 27%, and 44%.
"HMSY's stock gained 750% in the four years between 2003 and the end of 2007. It has formed a new base in 2008 despite accelerating revenue and profits, so I think it is poised to make a nice run in 2009."
Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
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