While the rest of the world zigged on HCA stock, Hedgeye zagged, and it paid off as a winning trade. Here’s what happened.
HCA Holdings (HCA) took a hit on Monday, closing down -6.5% after a soon-to-be-released New York Times investigative article was announced by management. In a nutshell, the article highlighted concern over cardiovascular surgical procedures at HCA affiliate hospitals. Despite the hype, we bought the stock for the Hedgeye Virtual Portfolio on the red per Hedgeye Health Care Sector Head Tom Tobin’s guidance.
That paid off for us today as we sold HCA into the +5% rally as the rest of the world wised up and realized Monday’s news was overblown. Below are Tom Tobin’s notes on HCA and why we are reiterating our long bias:
• The New York Times published its article on HCA which was previewed on yesterday’s earnings release and conference call.
• It reads reasonably well for HCA relative to the stock price which fell -9.1% intraday and closed down -6.5%.
• Staying long represents thesis drift for us on HCA, as we had seen their lack of legal issues as a positive relative to our Physician Utilization Uptick theme.
• The quarter saw continued fundamental outperformance relative to the Hospital Subgroup and continues to support the long case
