A large HealthSpring Inc. (NYSE:HS) shareholder expressed its belief that the healthcare company should undergo a share repurchase to unlock value, according to a Schedule 13D/A filing with the SEC. Shareholders are hoping that the hedge fund can force management to take action and help the company's fledging stock price.

The Clinton Group, which owns 4.9 percent of the company, indicated their belief that HealthSpring should take on additional debt or investigate a range of other options to ramp up their share repurchase program. Moreover, despite the hedge funds reduction in its position in the company, it still continues to support the management team.

"Despite (i) the strong Q2 financial  performance and the surpassing of analyst expectations, (ii) the increase in 2007 EPS guidance, (iii)  positive legislative developments and (iv) the completion of the accretive acquisition of Leon Medical Centers Health Plans, Inc., HealthSpring stock continues to languish at a valuation below its peers," said the hedge fund in a letter to the board.

The hedge fund then reiterated its belief that the company has additional debt capacity to repurchase shares to unlock this value, and that management should either (i) investigate upsizing its pending debt raise or adding another tranche to execute a Dutch Auction repurchase of the Issuer's shares or (ii) employ its unrestricted parent cash and $100 mm undrawn revolver to aggressively execute open market purchases of the stock.

In the end, any actions taken by HealthSpring could go a long way to unlock value in a company that is clearly undervalued. Combined, these factors make HS a stock that is definitely worth watching!

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