Buy - Price 9.29 on Nov. 26
by Jefferies & Co.

Upgrading from Hold. An aging populace and primary focus on nondiscretionary rehabilitation make HLS largely resilient to an economic downturn. Medicare accounts for about 67% of revenue; 2.2% is paid by Medicaid; 1.5% is reserved as uncollectible. [Most] Medicare patients [are getting] nondiscretionary treatment for conditions like strokes, debility/polyneuropathy, fractures...and replacements. Strong cash flows and discretionary [capital expenditure] give management significant deleveraging resources, which can be amplified by incremental income-tax recoveries and derivative proceeds. HLS paid down $208 million of long-term debt in the first ten months of '08 and is targeting a debt-to-Ebitda ratio of 4.5 times or less by the end of 2010, representing a full-turn improvement....Given the resiliency of HLS...to the economic environment and its '09 [free cash flow] yield of 14.1%, we believe shares should trade at a 10 times multiple, which translates to our 13.50 target. Investor concerns about HLS' leverage [seems] to be the primary risk to this story. Market cap: $817.5 million.

Another company that he expects to fare well, irrespective of the economy, is HealthSouth (HLS), which runs in-patient rehabilitation hospitals. "Even in a down economy, people are going to continue to get strokes and break their hips and need hospital rehab," Osterweis says. The stock, which is currently trading around 12, has slid by about 40% since Oct. 1, in the market's general downturn. In the money manager's opinion, it has become attractively valued against its peers. The company is expected to generate adjusted free cash flow of about $1 a share this year and $1.30 next year. "And we think earnings and free cash flow will grow pretty steadily over the next few years," Osterweis says. He thinks HealthSouth could double or triple in the next 12 to 18 months.

PE of 4, and a PEG of 0.90.

35

Underperform - Price 17.97 on June 23
by Raymond James

HLS announced an underwriting agreement regarding issuance and sale of 8.8 million shares of common...to JPMorgan Securities...HLS [must] use 25% of net proceeds ...to repay borrowings under its term loan facility[and] intends to retire approximately $30.3 million of 10.750% senior subordinated notes due Oct. 1...The transaction...deleverages the balance sheet and is [more than] 5 cents accretive. Market cap: $1.4 billion.

35

56.6

40.8

These Comeback Stocks Are Ready to Rumble
John Osterweis, portfolio manager of the Osterweis Fund, says VeriSign, Boyd Gaming and HealthSouth are ready to get off the ropes and rumble.

Click here to watch the video.

39.5

Continuing to sell off assets, stock price continuing to go down. Will always be associated with the term "Stock Scam"

Stock has done nothing but go down for a long time. Im in it for a loss.

They quoted me a cash price which I paid in full. Now they're trying to bill me for more. This is a sleazy company to deal with. It's a slimey culture from top to bottom.

Healthsouth has treated me very unethically. I believe that companies that will treat customers dishonestly will also treat shareholders dishonstly. These people are crooks!