Good morning, As always, email us if you have any questions on any of the data or our takeaways - .
KEY CALL OUT
As mentioned in this morning's Health Care AM Brief, we see positive performance for the XLV in Macro Quad 4. "The back test results look really positive. On average, Quad 4 is one of the best times to be long Health Care, as there are plenty of positive factor exposures like large cap, low debt leverage, and low multiples." It's a "defensive" sector, but as we can see in our weekly update, there's the added benefit of an improving NTM estimate trend. Based on the current path for estimates, April may be the bottom. To get there faster, we'll need to see optimism pick up about 1Q22 as Omicron rolls off. If that starts to happen, the early sign is decisive acceleration in the sales trend. There's a case to be made that pent up demand will come through as COVID-19 cases and hospitalizations drop, and the Acceleration trend has historically improved as Macro Quad 4 drags on.
If we're looking at pent-up demand coming through, we'll likely see the same sort of improving volume dynamics that drove lots of activity in the US Medical Economy in late 1Q21 and 2Q21 before Delta hit. Meanwhile, the labor/staffing crisis seems to be heating up, which will hurt some and help others. Always happy to discuss or answer questions on any of our screening work.
CLICK HERE for the full weekly update (our Sector Distillation deck).
ESTIMATE REVISION TRENDS
MICROQUADS*
Noteworthy this week: We've included MicroQuad 2, where we see PGNY joining the long bin. The fertility benefits specialist is on our radar already, and it seems like we've got to speed up our work. No huge changes in the other bins, but sometimes what's not moving is more interesting than what is, and we continue to see TDOC, EXAS, and DGX "stuck" in Short bins. It's also worth noting/calling out that TDOC's forecast has worsened since mid-January, and the stock is now expected to slip back into MicroQuad 4 in March.
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).
Here's the model portfolio performance - MicroQuad 1 outperformed last week:
Position Monitor Stocks**
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.
