Good afternoon, Please see below for our usual MicroQuad and other weekly data updates, including the link to the Sector Distillation slides. We're highlighting MicroQuad 1 stocks this week and noting JNJ's move from MicroQuad 3 -> 4 as we approach the start of 3Q21 earnings releases. As always, email us if you have any questions on any of the data or our takeaways - .
KEY CALL OUT - MicroQuad 1
CLICK HERE for the full weekly update (our Sector Distillation deck). If you didn't catch today's Morning Brief, MicroQuad 1 is a "holding place" where companies have two paths; reaccelerate and convert into MicroQuad 2 and emerge as a long, or regress to deceleration and descend into MicroQuad 4. It's a short allocation in the model, but they are not a "full" short positions. We've updated the tables in several places to look out a couple of months, and we can see that AMED, ENSG, and NEO are in the "looks like it can accelerate to MicroQuad 2" camp. On the other side, DGX, FLGT, LH, PKI, and to a lesser extent EXAS look like they are heading for 1Q22 deceleration (MicroQuad 4). NEO has been rumored twice to be an acquisition target in recent days, and it remains on our Best Ideas Long list. Seeing ENSG is prompting us to take a closer look at our Nursing Care data series for signs of an inflection point when BLS updates this week. We've already detailed our long case for DGX, but the MicroQuad backdrop may explain explain the weakness and helps highlight the importance of the timing of the catalyst. We're currently short EXAS and between MicroQuad trends and our claims index, we are comfortable that consensus is coming our way. Is it then more or less likely that PKI heads into MicroQuad 4 to join MRNA for the same reason(s) the other COVID testing names reside there? In the context of global supply chain issues, it's worth doing a quick check.
Estimate Revision Trend
MICROQUADS*
As a reminder, if you have questions about the MicroQuad process, please try to find ~20 minutes to watch our Dec 30, 2020 call replay: Process & Utility of the Hedgeye Health Care #MicroQuads - CLICK HERE for event details (includes video link and materials link).
In addition to the MicroQuad transition highlights above (focused on MQ1), two noteworthy shifts are JNJ moving from MQ3 -> MQ4 week-over-week, and SGRY rotating from MQ1 -> MQ2. Our JNJ forecast algo was signaling the potential for organic sales growth to roll over in 3Q21 when we updated it at the end of August, so we'll have to see if all our data continue to sing the same song when JNJ reports on 10/19.
Position Monitor Stocks
Sector Trends - S&P 500
All data available upon request. Please reach out to with any feedback or inquiries.
Best,
Thomas Tobin
Managing Director
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William McMahon
Analyst
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Justin Venneri
Director, Primary Research
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*Please note, not all Position Monitor names make it into the MicroQuad output - most likely due to a lack of sufficient historical trading and estimate data.
**We may show stocks that we have data for but the correlation fails to meet the criteria for MQ bin inclusion week-to-week.
