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Coventry Health (NYSE: CVH) is recently trading at $32.10 in pre-open trading, below its close of $40.

CVH lowered EPS guidance because of a delayed recognition of higher medical costs.

Stifel Nicolaus says: "Maintain Hold rating as the managed care industry continues a period of transition prior to the 2008 election.

CVH July option implied volatility of 35 is near its 26-week average according to Track Data, suggesting non-directional price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

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Coventry Health Net (NYSE: CVH), a managed healthcare organization, is recently trading at $39 in pre-open trading, below its close of $43.

Humana (NYSE: HUM) lowered Q1 and 2008 guidance this morning and Wellpoint (NYSE: WLP), a health benefits company, lowered its full-year financial outlook on March 11.

CVH overall option implied volatility of 40 is above its 26-week average of 30 according to Track Data, suggesting larger price movement.

Health Net (NYSE: HNT), a managed care organization, is recently trading at $31.43 in pre-open trading, below its close of $34.58.

HNT overall option implied volatility of 45 is above its 26-week average of according to Track Data, suggesting larger price risk.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

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So many things are sold on the Web now that it can be difficult to remember when it all got started. Some might be surprised to know, for example, that the first Internet-based sale of a U.S. health insurance policy was made over ten years ago. The firm involved was a Mountain View, California outfit that serves nearly 400,000 customers today.

eHealth, Inc. (NASDAQ: EHTH) is an online source of health insurance for individuals, families and small businesses. The company presents health insurance information in a user-friendly format, enabling the comparison and purchase of health insurance products that best meet consumers' needs. The firm is licensed throughout the United States, operating in partnership with some 160 health insurance carriers. It provides health, dental, and vision insurance products from the likes of Aetna Inc. (NYSE: AET), Cigna Corporation (NYSE: CI) and Coventry Health Care, Inc. (NYSE: CVH).

eHealth pleased investors earlier in the month, when it reported 3rd Quarter (Q3) earnings per share (EPS) of 15 cents and revenues of $23 million. Analysts had been expecting 12 cents and $22.4 million. Management also guided fiscal year (FY) 2007 EPS to 51-55 cents (48 cent consensus) and FY07 revenues to $87.2-$88.0 million ($86.8M consensus). Estimated membership grew 35%year over year. EHTH shares popped on the news and then moved into a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Brokers recommend the issue with four "strong buys", three "holds" and a "sell". Analysts see a 32% growth rate, through the next year. The EHTH Sales Growth rate (37.72%), Net Profit Margin (25.05%), Return on Assets (27.98%), Return on Investment (32.14%) and Return on Equity (103.02%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 67 percent of the outstanding shares. Over the past 52 weeks, the stock has traded between $17.67 and $34.89. A stop-loss of $28.70 if one were to consider the stock looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.

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Sellers took control at the open and sent the market lower. The Dow Jones Industrial Average got with striking distance of the August 1st low -- down 200 points -- before rebounding to close down only 31 points.

The NYSE had volume of 4.3 billion shares with 1,279 shares advancing while 2,058 declined for a loss of 14.27 points to close at 9,435.04. On the NASDAQ, 3.2 billion shares traded, 1,309 advanced and 1,792 declined for a loss of 11.6 to 2,544.89.

Eaton Corporation (NYSE: ETN) rose $6.98 (8%) to $93.45. Las Vegas Sands Corp. (NYSE: LVS) fell $7.68 (-7%) to $100.47. Coventry Health Care, Inc. (NYSE: CVH) strengthened $3.26 (6%) to $54.38. Whole Foods Market, Inc. (NASDAQ: WFMI) fell $2.58 (-6%) to $42.27. Darden Restaurants, Inc. (NYSE: DRI) rose $2.15 (5%) to $42.94.

With the market plunging on the open, the options were active. There were 8.8 million puts and 8.3 million calls traded for a put/call open interest ratio of 1.07. Garmin Ltd. (NASDAQ: GRMN) saw heavy volume on the August 45 calls (GQRHI) with over 259,000 options trading. The August 75.0 Garmin calls (GQRHO) moved 121,000 options. Most of this option volume is dividend arbitration in anticipation of the 0.75 cent dividend Monday.

Apple Computer, Inc. (NASDAQ: AAPL) saw heavy volume on the August 130 calls (APVHF) with over 55,000 options trading. Financial Sector SPDR ETF (NYSE: XLF) saw heavy volume on the September 34 puts (XLFUH) with over 234,000 options trading. The other strikes were active as well and they investors were likely trying to protect investments capital. PowerShares QQQ Trust ETF (NASDAQ: QQQQ) saw heavy volume on the September 45 puts (QQQUS) moving 171,000. Put index options can work as an insurance policy against market falls.

Kevin Kersten is an Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about.

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MOST NOTEWORTHY:

• Cowen is optimistic on Merck's (NYSE: MRK) business momentum, key products, and pipeline, and upgraded the pharmaceutical giant to Outperform from Neutral.

• JP Morgan believes the recent discoveries have created a lower risk profile for McMoRan Exploration (NYSE: MMR), upgrading shares to Overweight from Neutral.

• Needham upgraded shares of TheStreet.com (NASDAQ: TSCM) to Strong Buy from Buy on the Corsis acquisition as they believe the deal strengthens the company's advertising business.

• Jefferies upgraded shares of Goodrich Petroleum (NYSE: GDP) to Buy from Underperform as they believe success at the James Lime development program will grow production and cash flow.

• Banc of America upgraded Coventry Health (NYSE: CVH) to Neutral from Sell as they believe the company's three recent acquisitions will accelerate growth beginning next year...

• WestLB upgraded Nokia (NYSE: NOK) to Buy from Add.

• Bear Stearns upgraded Take-Two Interactive Software (NASDAQ: TTWO) to Peer Perform from Underperform and Electronic Arts (NASDAQ: ERTS) to Outperform from Peer Perform.

• Citigroup raised AnnTaylor Stores (NYSE: ANN) to Hold from Sell.

• Buckingham upgraded DirecTV (NYSE: DTV) to Neutral from Underperform.

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Coventry Health Care's (NYSE: CVH) earnings report from late April won't make anybody ill. Operaring revenues were up 15.4% to $2.24 billion. Net earnings were $127.5 million and diluted EPS were $.80, excluding a $.04 per share debt refinancing charge. Coventry is growing both organically and by acquisition. It purchased Concentra worker's compensation business unit in order to gain a national market, and has announced plans to acquire selected assets of Mutual of Omaha's health insurance business in the near future. In order to finance these acquisitions, Coventry Health Care retired $170.5 million in debt at 8.125 % to refinance $400 million of debt at 5.95%. The company also bought back 4 million of its own shares for $221 million.

According to CEO Dale Wolf, the company is doing exactly what it promised shareholders it would do: acquire strategic assets, buy back its own stock, refinance debt to more favorable terms, and launch new products and/or policies. One policy that Coventry has been pursuing is to raise premium yields on its members. Current Coventry members yield $271.03 in premiums per month, an increase of 5.6%. But expenses increased 4.8% to $212.43 during that same period, thereby negating most of the increase in premiums.

Coventry forecasts 2Q 2007 revenues of $2.3-$2.4 billion, yielding diluted EPS of $.94-$.96. FY 2007 total revenues are forecast at $8.1-$8.4 billion, yielding diluted EPS of $3.92-$3.98 icluding $.04 per share debt refinancing charges. The stiock opened the year at $49.81, and closed recently at $59.63, a respectable 20% run-up in share price. But health care costs have become a hot topic in Democratic presidential debates recently, and insurance companies have been held responsible for runaway costs and substandard treatment complaints. At half the size of health insurance giant Aetna (NYSE: AET), Coventry is a slightly better deal in terms of its p/e multiple, but there are more attractive investments out there than either one of these.

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MOST NOTEWORTHY:

• Prudential downgraded shares of Pfizer Inc (NYSE: PFE) to Neutral from Overweight with a $29 target to reflect concerns about competition from generic medications and a lack of new products.

• Deutsche Bank cut both ExxonMobil Corp (NYSE: XOM) and ConocoPhillips (NYSE: COP) to Hold from Buy on valuation.

• Citigroup downgraded shares of Xerox Corp (NYSE: XRX) to Sell from Hold as the firm believes the acquisition of Global Systems could hurt profits in the short-term. The broker recommended trimming positions of Xerox on any strength.

• Amazon.com (NASDAQ: AMZN) was cut to Underperform from Market Perform at Piper Jaffray based on valuation...

• Stifel lowered its rating of Jones Soda Co (NASDAQ: JSDA) to Hold from Buy on valuation.

• Deutsche Bank downgraded shares of Chevron Corp (NYSE: CVX) to Sell from Hold based on valuation.

• CIBC downgraded shares of Coventry Health Care, Inc (NYSE: CVH) to Sector Performer from Outperformer on valuation.

• Needham downgraded Vertex Pharmaceuticals Inc (NASDAQ: VRTX) to Hold from Buy.

• Adtran, Inc (NASDAQ: ADTN) was cut to Sell from Hold at Brean Murray.

• JP Morgan removed Johnson Controls, Inc (NYSE: JCI) from its Focus List citing recent share strength.

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How would Sam Stovall, Elaine Garzarelli and Don Phillips invest $10,000 in the coming year? The question was posed to these and other Wall Street seers by syndicated columnist Andrew Leckey, whose Successful Investing column appears in over 150 newspapers, including the Chicago Tribune and the New York Daily News.

Here, courtesy of The Bull & Bear Financial Report, Leckey explains, "Each year we toss that question across the plate to a panel of investment experts.

"The experts for 2007 predict a bouncy but generally upbeat stock market, mostly because stocks tend to shine in the third year of any presidency, and George W. Bush will be in year No. 3 of his second term.

"Large-cap stocks are expected to lead. In addition, more experts are recommending the increasingly popular exchange-traded funds, or ETFs, which hold baskets of stocks but are traded on exchanges with no minimum or redemption penalties. Here's advice for that mythical $10,000 in 2007:

"Knocking the cover off the ball for a second year in a row was Richard Cripps, chief market strategist for St. Louis-based Stifel, Nicolaus & Co.

"His recommendation to stash the entire 10 grand in American Eagle Outfitters (NASDAQ:AEOS) last year produced a gain of more than 100%. His Omnicare Inc. (NYSE:OCR) pick the previous year rose 66%.

"Now, Cripps says, 'The market rally will continue, taking the Dow Jones industrial average to 13,000 in the first quarter before a 10% or more correction in late spring and summer.'

"Invest the $10,000 in stock of Coventry Healthcare Inc. (NYSE:CVH), a managed-care organization. Concerns about Medicare reimbursement and changing political winds in Washington have caused investors to shy away from Coventry despite its solid outlook for growth and attractive valuation."

"Sam Stovall, senior investment strategist for Standard & Poor's Corp. in New York, says, 'Historically, the third year of a presidency has produced an average gain of 18%, no matter whether the president is Republican or Democrat, the Congress unified or divided.'

"His consumer cyclical choices are Consumer Discretionary SPDR (ASE: XLY) or Coach Inc. (NYSE: COH). In industrials, there's Industrial Select Sector SPDR (ASE: XLI) or L3 Communications Holdings (NYSE: LLL). In technology, there's Technology Select Sector SPDR (NYSE: XLK) or Western Digital (NYSE: WDC).

"Sheldon Jacobs, editor of The No-Load Fund Investor, Irvington-on-Hudson, N.Y., says, 'In addition to the presidential cycle, stock valuations remain reasonable despite their big run-up.

"I'd divide the $10,000 between T. Rowe Price New Era Fund (PRNEX), a natural resources fund that is a 'pseudo-commodity' play, and the PowerShares FTSE FAFI US 1000 (ASE: PRF), an ETF weighted to each stock's fundamentals rather than its market capitalization."

"Elaine Garzarelli, president, Garzarelli Research Inc., New York, says, 'I'd put $2,500 of the $10,000 in 2007 into Nasdaq-100 Trust Shares (NASDAQ: QQQQ) and $2,500 into iShares MSCI Emerging Markets Index (ASE: EEM). Then I'd put $2,500 into iShares Russell 2000 Index (ASE: IWM) and $2,500 into Merrill Lynch & Co. (NYSE: MER).'

"Paul Nolte, investment director with Hinsdale Associates, Hinsdale, Ill., says, 'The key is the impact of housing on consumer. We're playing a defensive game in a more volatile year.

"Divide money between bonds, with the 10-year bond having a shot at going below 4% next year, and stocks of Anheuser-Busch Cos. (NYSE: BUD), Bristol-Myers Squibb Co. (NYSE: BMY) and American States Water Co. (NYSE: AWR)."

"Jeffrey Saut, managing director for investment strategy, Raymond James & Associates, St. Petersburg, Fla., says, 'Invest it all in ETFs because they're more efficient for diversification. Then select sectors with wind at their back, such as water through PowerShares Water Resources (ASE: PHO) and other ETFs in aerospace/defense, financials and technologies.'

"Examples are PowerShares Aerospace & Defense (ASE: PPA), Vanguard Financials ETF (ASE: VFH) and Technology Select Sector SPDR (ASE XLK).

"Don Phillips, managing director of Morningstar Inc. in Chicago, says, 'Cards are lining up nicely for large-cap growth stocks, and most investors are underexposed to them. You typically find the best opportunities in beaten-up areas, and nothing's been beaten up like these.

"Put $10,000 into Primecap Odyssey Growth Fund (POGRX), a no-load, relatively inexpensive fund run by astute managers with an excellent long-term record.'"

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