Big Hedgeye Healthcare Victory In This Battleground Stock | $ATHN

Takeaway: Our Healthcare team scores big long Athenahealth and short AMN Healthcare Services.

It’s been a huge week for our healthcare team. Two monster calls which have worked out very well.


Big Hedgeye Healthcare Victory In This Battleground Stock | $ATHN - z athn


First up.


Healthcare analyst Tom Tobin’s long call on battleground stock Athenahealth (ATHN) with 30% short interest.


Spot on.


ATHN shares rocketed over 24% after delivering strong 3Q results. The healthcare technology company continues to take market share as it builds product awareness among physicians.


(Case in point? Check out the company's hilarious, new #LetDoctorsBeDoctors campaign, with full-fledged music video featuring doctor/rapper ZDogg, in “EHR State of Mind”)

Tobin sees at least 30% upside from here.


Here's an update on ATHN from Healthcare analyst Andrew Freedman post today’s run-up in the stock:


“The quarter was very strong across most key metrics. But Doc adds were the big upside surprise in the quarter with 3,953 net collector physicians added compared to 2,846 consensus. While we flagged the sequential acceleration in our ATHN practice tracker in the quarter, we were still surprised by how strong the number was.  


Despite a seasonal dip in bookings in Q3, management stated that they are tracking in-line with their 30% bookings target year-to-date."


We maintain that ATHN is a $200+ stock as they are best positioned competitively to take share in a consolidating ambulatory practice management and EHR management.”


Big Hedgeye Healthcare Victory In This Battleground Stock | $ATHN - athn docs


Click here (and here) to read more on our Healthcare team’s Athena thesis.


* * *


Another big win (this time on the short side) is AMN Healthcare Services (AHS). It's plummeted a whopping 17% on the week after a number of hospitals, including HCA and CYH, reported disappointing quarterly results.


Even though the stock is up today, we’re sticking with our bearish call. Here’s another update from Freedman:


"AHS came under pressure this week as the hospitals continue to report disappointing volume growth related to the #ACATaper.  Hospitals have been on a hiring spree to catch up with incremental ACA related demand, and now that is starting to slow as evident by the most recent Healthcare JOLTS data. 


With think organic growth collapses in coming quarters and stock that ultimately trades back down to the mid-teens."



Click here to read our Healthcare team’s short thesis on AHS.


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FMHQ (Friday Morning Housing Quant)

Takeaway: It was another strong week for builder stocks as the average builder is now up +7.2% QTD. BZH rose 8% in the latest week.

Our FMHQ (Friday Morning Housing Quant) tables present the state of the publicly traded homebuilders in a visually-friendly, quantitative format that takes about 60 seconds to consume. 


Quick Quant Takeaways: 

  • Performance Roundup: Housing stocks put in another very strong week with the sole exception of Pultegroup (PHM), which sank on disappointing earnings. Interestingly, PHM is the one builder that has historically put up underwhelming 4Q returns so it begs the question whether there's something recurrent going on there. Returns remain extremely strong almost across the board with QTD absolute returns for ITB and XHB at +6.4% and +6.0% vs the S&P 500 +6.9%. Meanwhile, the average builder from our tables below is +7.2% QTD, while the median is +6.4%. Our preferred four horsemen of 4Q among builders are KBH, BZH, LEN & NVR, which are +2.4%, +14.2%, +7.7%, +8.2% QTD. BZH had a monster week, rising 8.0% on the week, while LEN and NVR were +4.1% and +5.8% on the week, respectively. KBH, meanwhile, declined by -2.5%. 

  • Insider Buying: Not much to report here, as there's been none recently.
  • Beta: The highest beta names (1YR) remain HOV (1.45), KBH and BZH which are tied at 1.30. At the other end of the spectrum, the lowest beta plays are NVR (0.60), MDC (0.89) and TOL (0.98).
  • Short Interest: DHI, HOV and KBH have seen SI creep higher, rising as a % of SO by 2.6%, 2.6% and 2.2%, respectively in the latest month. BZH has seen SI fall by 0.8%.
  • Sell Side Sentiment: MTH has seen the largest drop in sell side support, while BZH, TMHC and DHI have seen the largest bump in support.
  • Valuation: The cheapest names in the group currently are BZH (9.6x), TPH (9.5x) and TMHC (9.5x), while the most expensive are NVR (15.3x), LEN (13.4x), and TOL (13.4x).


FMHQ (Friday Morning Housing Quant) - BQ 1


FMHQ (Friday Morning Housing Quant) - BQ 2


FMHQ (Friday Morning Housing Quant) - BQ 3


FMHQ (Friday Morning Housing Quant) - BQ 4




Joshua Steiner, CFA


Christian B. Drake

Hedgeye's Internet Analyst Nails Pandora Short Call | $P

Takeaway: Our contrarian Internet analyst made the short call on Pandora (P) before the bottom fell out.

It’s been a (really) rough day for Pandora shareholders. The stock has cratered over 30% today after the online radio streaming company reported ugly 3Q results.  


Hedgeye's Internet Analyst Nails Pandora Short Call | $P - 10 23 2015 Pandora


One Wall Street analyst wasn't caught by surprise. Hedgeye Internet & Media analyst Hesham Shaaban has long been skeptical about the stock. It was added to his Best Ideas Short list on 12/22/2014. Since then, Pandora is down 29%.    


Here’s an update from Shaaban following results:


“Pandora's 3Q release was pretty ugly.  P wound up missing 3Q revenues after guiding high on the last print, and cut 2015 revenue guidance back toward the low end of its initial 2015 guidance release, which it had raised twice this year.  More importantly, P may have telegraphed that it expects to lose Web IV through both its Ticketfly acquisition and its pre-1972 settlement.  Once the Web IV decision is out, P could be a single digit stock.” 


***Click here to read Shaaban’s research note earlier this week heading into the print.


Check out the slide below on Pandora. It's from his “Quarterly Internet Best Ideas Call” he hosted last week with institutional subscribers where he reviewed major themes and incremental developments for a slew of his best idea longs/shorts including Yelp!, LinkedIn and more.


Hedgeye's Internet Analyst Nails Pandora Short Call | $P - Pandora


***If you’d like to learn more about our institutional research offerings please ping

investing ideas

Risk Managed Long Term Investing for Pros

Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.

RTA Live: October 23, 2015



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USD, Oil, US 10 YR

Client Talking Points


Draghi rang that #cowbell and macro markets absolutely ripped – gotta love that, even though people will realize it’ll perpetuate as opposed to arrest #deflation (see our research note from last night); here’s a visual on USD during #GrowthSlowing data vs. Euro QE.


Showing no follow through on the QE “buy everything” hopes this morning and that makes sense to me – Nat Gas -1.3% to $2.36 and I think it’s time to sell some (or all) of the net long position we’ve been advocating in Commodities (Gold specifically) as of late.

US 10 YR

Up Dollar, Down Rates à not a growth signal, and we’ll stay with the USA Long Bond position as German 10yr Bund Yield breaks down to 0.50% and Swiss 10yr deflates to -0.33%

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

McDonald’s reports 3Q15 earnings Thursday, October 22nd before the market opens, with a conference call at 11:00am ET. We are expecting strong sequential improvement in performance globally. We look forward to giving you an update on the company’s performance next week, but this week we wanted to focus on the ‘Looming Crash in Beef.'


On Thursday, October 15th, we held a thought-leader call regarding the declining price of beef and how long it will continue. Prices have sky rocketed in recent years and are now standing at more than two standard deviations above the 30 year average. We believe a 50% decline down to historical averages is well within the realm of possibilities. Declining beef prices will be a major tailwind for McDonald’s as they navigate their turnaround.


Restoration Hardware opened its new Full Line Design Gallery at the Cherry Creek Shopping Center in Denver this week.  This is another anchor property -- using 53,000 feet of the 90,000 left vacant by Saks at Cherry Creek.


RH is taking up the size of its stores from an average of 8,000 square feet to about 40,000+ for its new stores – and productivity rates on these new assets are headed higher. In the old stores, RH could only show 10% of its assortment, while in the newer format stores, the company is showcasing better than 75%. Consumers can’t (and don’t) buy what they don’t see.


The #SlowerForLonger theme from Hedgeye Macro has been consistent and straightforward. Our pivot in advance of the most recent jobs report to get long of gold and stay out of the way short-side on commodities turned out to be a good position.


Growth expectations have been correctly revised, but there’s still a good amount of room between Hedgeye estimates and consensus. We are expecting GDP in a range of 0.1%-1.5% for Q3 and another 1-handle in Q4. If that proves accurate, flatter goes the Treasury curve (TLT, EDV), wider goes high yield spreads (bad for JNK), and down goes the USD (GLD).

Three for the Road


Most interesting macro signal today is the Bond Market doesn't give a damn about US stocks "up"



"To be the man, you gotta beat the man!"

-Ric Flair


Even though the Seahawks defeated the 49ers last night 20-3, Russell Wilson only put up 13.40 fantasy points.

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