Editor's Note: Please note that Healthcare analyst Tom Tobin will send out a full report outlining our high-conviction short thesis. In the meantime, below is a brief summary written by Hedgeye CEO Keith McCullough earlier this afternoon.
I'm I afraid to short High Short Interest (in most cases low quality) US stocks?
Seriously.
After a big decline on accelerating volume, AMN Healthcare Services (AHS) has bounced to a lower-high and is signaling immediate-term TRADE overbought within Tom Tobin's bearish intermediate-term TREND view.
On the fundamentals (per Tom Tobin and Andrew Freedman):
"Organic growth slowed sequentially again at AHS from peaks over 30% in 2015 to 28% in 1Q16, to 19% now in 2Q16. The reasons presented by management that have led growth from negative territory in 1Q14 center on an aging and retiring nurse and healthcare workforce alongside a tight labor and macro factors generally. We've been much more specific in our analysis of demand drivers, showing a strong relationship between the increase in insured medical consumers caused by the Affordable Care Act (and to a lesser extent payroll growth), which increased patient volumes and demand for labor on a 2 quarter lag, and subsequently produced accelerating price and volume for AHS and other staffing companies. As the contribution from insured medical consumers has already slowed from a peak of +8% to its current level of +1.5% currently (and likely lower in 2017), we believe the deceleration in organic growth at AHS is on a programmed path to turn negative, taking consensus revenue and margins with it."
Short Green,
KM