Q: What does the future hold for my shares of Humana Inc.? -- K.C., via the Internet

A: Recent success of the large health insurer is tied to its strong commitment to Medicare and its ability to capitalize on changes in that system.

Membership in its Medicare Advantage prescription-drug plans exceeded 1 million in 2006, an 80 percent increase for the year. An additional 100,000 members were added during January.

Shares of Humana (HUM) are up 12 percent this year following gains of 2 percent last year and 83 percent in 2005.

The positive news from its Medicare strategy is that it led to a doubling of profits, to $155 million, in the fourth quarter.

Revenues, profits and medical membership set records for the full year, and the company raised earnings projections for 2007.

"We transformed ourselves from a regional firm to a national competitor," said President and Chief Executive Michael McCallister as earnings were announced.

The not-so-good news is that its ever-growing dependence on government makes it more vulnerable to the quixotic nature of politics. Adverse changes in Medicare reimbursement rates or lost government contracts would have a significant effect on its bottom line.

In addition, although Humana has made gains at the expense of rivals, it must compete against larger firms UnitedHealth Group Inc., Aetna Inc. and WellPoint Inc., which have more resources. It may also take Humana some time to shift more participants into its Medicare Advantage programs and out of the less-profitable Medicare Part D plan.

Consensus analyst rating on the shares of Humana is a "hold," according to Thomson Financial. That consists of three "strong buys," two "buys," 11 "holds" and two "underperforms."

One beneficiary of recent good results is McCallister, a longtime Humana employee who assumed his current position in 2000 and led the firm through restructuring.

His salary was increased to $975,000 this year from $900,000 in 2006, according to a Securities and Exchange Commission filing. The firm also set target annual incentive awards for its executive officers, including McCallister, at 100 percent to 150 percent of their base salaries for this year.

Humana earnings are expected to increase 46 percent this year, versus 13 percent expected for the health-care-plan industry. Next year's forecast of a 16 percent growth rate matches the industrywide expectation. The projected five-year annualized growth rate is 16 percent versus 15 percent for its peers.

Q: What do you think of Needham Growth Fund, which was recommended to me? -- R.R., via the Internet

A: Featuring low portfolio turnover in the pursuit of reasonably priced growth, the small and distinctive fund has performed equally well in bear and bull markets.

But co-manager Vincent Gallagher recently left the fund, so Jim Kloppenburg is now its sole manager. Both joined it in April 2003.

"We don't see this as a management change that would either worry us or make us thrilled," said Todd Trubey, an analyst with Morningstar Inc. in Chicago. "We respect what this fund does, but we don't recommend it because its 1.91 percent annual expense ratio is just too expensive."

The $262 million Needham Growth Fund (NEEGX) is up 11 percent over the last 12 months, ranking near the top third of all mid-cap growth funds. Its three-year annualized return of 12 percent is near the midpoint of its peers.

Willing to make large commitments to sectors that it favors, it has a much larger technology stake than many comparable growth funds.