Medibank has been under selling pressure on fears of rising political risk. The Labour Party appears likely to campaign into the next Federal Election with a promise to limit annual premium rate increases to 2% for two years. This is well below the 4-6% historical trend.
Despite the concern highlighted above, we view Medibank as a buying opportunity, as it approaches an oversold level.
A rally back to $3.00 should provide an opportunity to set covered call options and generate additional premium income to complement the 6.5 cent September dividend.
Author: Leon Hinde
Leon has been working in the financial services industry for 18 years in management and advisory roles. Leon has extensive experience in general advice and dealings involving securities and derivative financial products.
PS 146 Securities & Derivatives, ADA 1 & 2 accreditation, Responsible Manager Certificate. Leon is authorised to provide financial product advice and deal with respect to the following financial products:
· Deposit Products
· Interest in managed investment schemes; and
· Government debentures, bonds and stocks