Madness (Pt 2) Updated

Last year I published Methods To My Madness Pt 2 where I presented part of my non-core investing strategies.  One section has seen some activity in the broader market recently to the point I figured an update was warranted.  The section in question:

Not so obvious are Webster, UMB Financial, Health Equity, UnitedHealth and Xerox.  Each of these companies operate Health Savings/ Flexible Spending Plans.

Earlier this year, Lanny (Dividend Diplomats) shared his new strategy incorporating HSAs.  He revealed his HSA selection to be BenefitWallet which happens to be a Xerox offering (Cha-Ching) administered by Bank of New York (double Cha-Ching).  (Note: both are in my portfolio).  Great strategy, by the way.

But what really got my brain working was the announcement by UMB Financial of their acquisition of a subset of The Bancorp’s (TBBK) HSA portfolio.  The question became how to capitalize on the obvious consolidation in this space.  I had assumed that the smaller players would be exiting first.  Apparently this was incorrect as the larger banks are rushing for the doors.  Robert Steyer reported in Big players dropping HSA business despite growth potential that WFC, USB, MTB, JPM and HBAN all shed this line of business. I wonder if the profit potential is less for large players due to Basil III or Dodd-Frank – providing entry for smaller players like WBS, UMBF or ONB?  If so, why does BAC remain?

As usual, more questions than answers – but my strategy of following the low-cost money trail seems to have some validity.  In some ways, this bears a similarity to Warren’s strategy of using the float.  For your viewing pleasure, following is the research performed thus far.

SOME TOP PUBLIC HSA PROVIDERS

PRODUCT COMPANY NOTES
HSA Bank (b) Webster (WBS) Acquired JPM accounts
Health Equity (o) HealthEquity (HQY) Acquired some TBBK accounts
Optum Bank (i) United Health (UNH)  Acquired WFC accounts
 BenefitWallet (o) Conduent (CNDT) Administrator: BK
 HSA Authority (b) Old Nat’l Bank (ONB)
 multiple (b) UMB Bank (UMBF) Clients: AON, HUM
 Payflex Systems (i) Aetna (AET)
 Lumenos HSA (i) Anthem (ANTM)
CHSA (o) WageWorks (WAGE)
 – (b) Bank of America (BAC)
NOTE: This list may be incomplete b-Bank, i Insurance, o-Other
Long all except AET, ANTM, WAGE
NOTE: updated 2 Feb 2017 to include WAGE’s acquisition of ADP’s HSA business

Another possibility could be additional consolidation by the banks on the list with an eye towards a spin-off.  This could explain the activists circling around WBS …

Just some random musings.

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