Q. My shares of Aetna Inc. have been disappointing. Please shed some light on prospects. - TB, via the Internet.

A. Health care continues to be a demanding business, even for a company that has worked hard to greatly improve its financial fortunes. Over the past decade the firm has unloaded unprofitable and non-core businesses while improving its profit margins.

Yet the third-largest US health insurer, with 19 million medical members, still faces tough competition from industry leaders WellPoint and UnitedHealth. Each has more than 30 million members and enjoys superior economies of scale.

Pricing competition and the financial implications of health care reform in Washington present the weightiest considerations for the company in its challenging field.

Shares of Aetna are down nine percent this year following last year's 51 percent decline.

Aetna's other lines include dental coverage and group life and disability insurance. It is looking to sell its pharmacy benefits management business.

The company recently bought employee assistance programme provider Horizon Behavioral Sciences LLC from Psychiatric Solutions Inc. for $70 million in cash. It also joined with pet insurance provider Pets Best Insurance Services to provide discounted rates on pet insurance plans to businesses and chambers of commerce in Connecticut and western Massachusetts.

Ronald Williams became Aetna chairman and CEO in 2006, coming from WellPoint Health Networks. With the likelihood of further consolidation in the health care industry, Aetna is considered a company that could either be a target or could acquire another company.

Because much of the potential downside is already factored into the stock price, the consensus analyst rating of Aetna stock from Wall Street analysts is "buy", according to Thomson Reuters, consisting of seven "strong buys", four "buys", seven "holds" and one "underperform."

With higher-than-expected costs such an issue for concern, the company said it is willing to forgo membership growth if it will improve its operating margins. According to a study of 60 insurers by Aon Consulting, costs for employer health plans are expected to increase 10 percent within the next 12 months due to an aging population, rising costs and growing patient demand for services.

Aetna earnings are expected to decline 27 percent this year versus the eight percent growth rate predicted for the health care plan industry. Next year's projected 12 percent rise compares to 10 percent expected for its peers. The five-year annualised return forecast is 13 percent, which is one percent lower than the industry-wide projection.

Q. Will my shares of Morgan Stanley Value Fund be doing better? - BC, via the Internet.

A. It is run by an experienced team of contrarians that favors stocks selling cheaply and tries to take advantage of troubled situations whenever it can.

Sometimes that team does, however, move early on stocks, which means it takes a while for the investment to work out. Its sector and company bets can also increase its volatility somewhat.

The $114 million Morgan Stanley Value Fund "A" is up 32 percent over the past 12 months to rank in the top one-tenth of large value funds. The three-year annualised decline of five percent is in the top one-third of its peers.

Team managers Jason Leder and Kevin Holt have managed the similar fund Van Kampen Comstock Fund for over a decade, while Devin Armstrong came on in 2007. The managers have meaningful personal investments in these funds.

Because of all this continuity, the loss of Morgan Stanley Value Fund's lead manager, Robert Baker, to retirement in July didn't signal a change in philosophy. The fund most recently cut back on cyclical stocks and, expecting a slower growth environment, moved into consumer staples such as Bristol-Myers Squibb.

"We like the team, we like the strategy, we like the results," said Greg Carlson, analyst with Morningstar Inc. "It is willing to look different from its peers, which can lead to streaky returns, but over the long term the record is very good."

Nonetheless, Carlson considers Van Kampen Comstock to be a better fund than this one because it is essentially the same, but with a cheaper annual expense ratio of 0.84 percent rather than this fund's 1.04 percent.

Morgan Stanley Investment Management has positioned its two fund brands Van Kampen and Morgan differently. The former is presented as offering basic choices for average investors and the latter as an upscale line with more specialised strategies. Morningstar believes that there is confusing redundancy and the company should do more to serve shareholders rather than push sales.

Financial services represents 20 percent of the Morgan Stanley Value Fund portfolio, with consumer goods, consumer services and media its other significant concentrations. The top stocks were recently Chubb, Viacom, Comcast, International Paper, Verizon Communications, eBay, Cadbury plc., JPMorgan Chase, Time Warner and Schering-Plough.

This 5.25 percent "load" (sales charge) fund requires a $1,000 minimum initial investment.