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HOLX: Healing America

Hologic (HOLX) is one of our top long ideas for 2013 as the company’s long-term growth prospects outweigh potential near-term weakness.  Longer-term, the company could be one of the stronger beneficiaries from the Affordable Care Act beginning in 2014 from a growing pool of newly-insured individuals.  Those bulk of these individuals will be in the 18 to 64 age group, which utilizes women’s healthcare (HOLX’s core market) more than most other healthcare services. In the near-term, we’re concerned about a potential slowdown in utilization and the lingering effects of Hurricane Sandy. However, both of these factors are temporary in nature.

 

HOLX: Healing America - HOLX   MQSA Facilities   Unit Growth   4Q12 normal

 

HOLX: Healing America - HOLX   Tomo Tracker 12 15 12 normal


Implications of the Affordable Care Act; Healthcare Expert Call

Implications of the Affordable Care Act; Healthcare Expert Call - KenBur.dialin

 

The Hedgeye Healthcare Team, led by Tom Tobin, will be hosting an expert conference call Thursday, January 3rd, at 1:00pm EST featuring industry expert Ken Burdick, former Senior Executive of United HealthGroup and Chief Executive Officer and President of Blue Cross Blue Shield of Minnesota.

The call will analyze the impact of the Affordable Care Act across the healthcare industry, addressing the opportunities and risks associated with the implementation of the Patient Protection and Affordable Care Act. Ken Burdick has more than 25 years of experience in managed healthcare and his insight to the implementation of this act will be extremely insightful and constructive in managing risk across the managed care names. 



KEY TOPICS WILL INCLUDE:

  • Will employers drop coverage? Penalties? Taxes?
  • Insurers versus exchanges
  • Consolidation among providers and payers  

    

Please dial in 5-10 minutes prior to the 1:00pm EST start time using the number provided below. A link to the presentation will be distributed before the call, if you have any further questions email .

  • Toll Free Number:
  • Direct Dial Number:
  • Conference Code: 939528#

 

ABOUT KEN BURDICK:

  • Served as SVP of Medicaid Business at Coventry Health Care Inc. and managed its Medicaid and Behavioral Health (MHNet) businesses
  • Served as President and CEO of Blue Cross and Blue Shield of Minnesota
  • October 1995 to May 2009 employed by UnitedHealth Group
    • May 2008 to May 2009, served as the CEO of Secure Horizons, a Medicare business
    • November 2006 to May 2008, served as the CEO of United Healthcare's Commercial Business
    • April 2004 to November 2006, served as CEO of United Healthcare's Southwest Region and President of United Healthcare Public Sector
    • January 2000 to April 2004, served as the CEO of United Healthcare of Arizona
    • Prior to 2000, served as the head of the national underwriting organization for all lines of business and the general manager of the central Texas operation 
    • Served as the CEO and President of United HealthCare Services, Inc.
  • Director of United Biologics, LLC since October 2012
  • Serves as a Director of A.T. Still University of Health Sciences
  • Serves on the Board of Directors for Preferred Homecare and PASR, a non-profit Board advancing school readiness throughout Minnesota
  • Earned his bachelor's degree from Amherst College and a law degree from University of Connecticut School of Law  

EZPW: End Of The Golden Age

Pawn shops like EZ CORP (EZPW) are particularly sensitive to the price of gold. Think about how many people come in to pawn or sell gold jewelry or scrap it for cash. With the price of gold sinking week-after-week as the great commodity bubble deflates, pawns are getting hit. But it’s not just the price of gold that’s causing headaches for EZPW, it’s gold volumes. Since Q312, gold volumes have fallen off a cliff and have yet to recover. It’s a problem that will materially affect earnings going forward hence our short position on EZPW in our Real-Time Alerts. Another company that will bare the brunt of the decline in volumes is Cash America (CSH).

 

EZPW: End Of The Golden Age - EZPW GOLD VS VOL S normal

 

EZPW: End Of The Golden Age - ez slide normal


Early Look

daily macro intelligence

Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.

Go Forth And Conquer

Client Talking Points

Managing Risk

As the transition from #GrowthSlowing to #GrowthStabilizing continues, commodities will keep deflating in price as the number of total CFTC net long contracts declines along with the price of gold, silver and other assets. This whole #GrowthStabilizing thing is good for America, but isn’t very welcome by those who are long gold and/or Treasuries. Corn is getting clobbered, along with wheat, soybeans and other commodities now that investors are realizing you can’t just pump out more rounds of quantitative easing to artificially inflate prices. Keep an eye on gold, as it snapped our long-term TAIL risk line of $1671 last week and has fallen considerably in price since then. Same goes for the CRB Commodities Index, which remains in a bearish formation.

Dollar Holler

The US dollar has been up for 9 of the past 13 weeks, which certainly doesn’t help commodity bulls. A strong dollar helps strengthen America, so those of you who are trading the commodity deflation cycle, hats off. Our range for the EUR/USD at the moment remains at $1.31-1.33. 

Asset Allocation

CASH 55% US EQUITIES 21%
INTL EQUITIES 12% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 12%

Top Long Ideas

Company Ticker Sector Duration
NKE

Our competitors are neutral to bearish on the name ahead of earnings, but we think they’re missing the bigger picture. We think concerns over the shoe cycle rolling over are overdone. With R&D in the mid-teens, NKE has the ability to drive the ‘sneaker cycle’ in a case of “the tail wagging the dog”. We also think $NKE is a candidate for releasing a special dividend when they report EPS next week.

SBUX

Uncertainty in US from a macro perspective (jobless claims uptick) gives us pause from TRADE perspective although coffee prices will serve as a tailwind going forward. Company is becoming more complex, taking on risk as it acquires new brands. Longer-term, we view Starbucks, along with YUM, as one of the most attractive global growth stories in our space.

FDX

Margins are in a cycle trough as the USPS is on the brink. FDX is taking more share in the U.S. and following the recent $TNT news flow we think $UPS is in a tough spot.

Three for the Road

TWEET OF THE DAY

“The 12 Days Of Trading" On the 1st day of trading the markets gave to me, a spike from high frequency' bit.ly/Y6WqQO” -@bclund

QUOTE OF THE DAY

“Whenever you find that you are on the side of the majority, it is time to reform.” -Mark Twain

STAT OF THE DAY

London Stock Exchange to pay $482 million for a 60% stake in LCH.Clearnet.


European Banking Monitor: More Green than Red This Week

Takeaway: Bank swaps continue their march lower.

Below are key European banking risk monitors, which are included as part of Josh Steiner and the Financial team's "Monday Morning Risk Monitor".  If you'd like to receive the work of the Financials team or request a trial please email .

 

Key Takeaways:

 

* European Bank: Broad-based improvement in Europe on the week, inline with Asia and USA.

 

* Euribor-OIS: Had been quietly moving higher, seems to have stabilized in the 11-13 bps range, and is signaling an ongoing stabilization in the interbank risk market.

  

* On OMTs Reporting: The ECB has stated that Aggregate Outright Monetary Transaction holdings and their market values will be published on a weekly basis and the average duration of Outright Monetary Transaction holdings and the breakdown by country will take place on a monthly basis. There is no indication that the OMTs has been initiated to date.

 

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If you’d like to discuss recent developments in Europe, from the political to financial to social, please let me know and we can set up a call.

 

Matthew Hedrick

Senior Analyst

 

(o)

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European Financials CDS Monitor – Swaps tightened broadly in Europe last week as 35 of the 37 reference entities we track showed improvement. French, German, Italian, and Spanish bank swaps all showed decent WoW improvement. 

 

European Banking Monitor: More Green than Red This Week  - 55. banks

 

Euribor-OIS spread – The Euribor-OIS spread tightened by less than 1 bp to 12 bps. The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. 

 

European Banking Monitor: More Green than Red This Week  - 55. euribor

 

ECB Liquidity Recourse to the Deposit Facility – The ECB Liquidity Recourse to the Deposit Facility measures banks’ overnight deposits with the ECB.  Taken in conjunction with excess reserves, the ECB deposit facility measures excess liquidity in the Euro banking system.  An increase in this metric shows that banks are borrowing from the ECB.  In other words, the deposit facility measures one element of the ECB response to the crisis.  

 

European Banking Monitor: More Green than Red This Week  - 55. facility


IDEA ALERT: SHORTING EZPW

Takeaway: We added EZPW to our list of real time positions on the short side. The December and March comps will be tough.

Gold continues to look terrible based on our Macro Team's outlook. This is a problem for gold-sensitive pawn lenders like EZ Corp. While the company's transparency around the issue has improved, its sensitivity to the problem remains. 

 

In the first chart below we look at the relationship between the year-over-year change in gold prices and the year-over-year change in earnings contribution from gold-related scrap sales. The second chart shows the dynamic on a longer-term basis. Note the tougher comps in their fiscal first and second quarters (the December and March quarters).

 

Interestingly, while gold prices were the initial catalyst, it's clearly now gold volumes that are the real problem. Note the widening divergence in recent quarters. This is attributable to rapidly decelerating volume dynamics. While we're a bit surprised by how rapid the decline in volume has been relative to the theories put forward to explain it, we continue to assume that it's a problem that isn't going away.

 

The other company facing a similar dilemma is Cash America (CSH).

 

IDEA ALERT: SHORTING EZPW - EZPW GOLD VS VOL S

 

IDEA ALERT: SHORTING EZPW - ez slide

 

Over the past few weeks, gold prices have moved lower, closing yesterday at $1,646/oz. For reference, the current gold price is 8.4% lower than the most recent high of $1,797/oz on 10/4/2012. This is a negative development for the payday and pawn lenders.

 

IDEA ALERT: SHORTING EZPW - EZPW Macro

 

IDEA ALERT: SHORTING EZPW - Gold Price Headwind Tailwind

 

Joshua Steiner, CFA

 

Robert Belsky


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