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POSITION MONITOR | SAYING GOODBYE TO SOME POSITIONS | WHAT'S THE SCORE? - Health care position monitor

OVERVIEW

We've added a 'Score' column to our Position Monitor.  The value represents the result of a machine learning process we've developed and refined to replace the Sentiment Score, which we used to identify extremes in short interest, sellside sentiment, and relative and absolute performance.  While attractive intuitively, the Sentiment Score has limitations -primarily the limited number of features it allowed us to incorporate.  The 'Score' method has a more complete feature set and allows us to roll together stocks within a subgroup and to consider the entire universe collectively.   Overall, the Score for our entire universe continues to deteriorate, meaning the probability of success on the short side remains high and rising.

POSITION MONITOR | SAYING GOODBYE TO SOME POSITIONS | WHAT'S THE SCORE? - sentimentnew

DVA | We moved DVA down on our active short list given the negative move in the stock on earnings and the next catalyst likely to be a positive one with the closing of  the DMG sale to UNH. However, the outlook is sufficiently negative to maintain the short.  We believe the challenges for DVA are structural in a post roll-up era.

DXCM | We're probably getting paid more than we should to wait for increasingly difficult compares in an arena that is unlikely to expand much beyond the core intensive insulin user.  It is not unreasonable to imagine that the healthy and the diabetic will be continuously checking their blood glucose levels in the future, as management suggested on their earnings call, but how many non-diabetic people do you know who check their blood glucose? Please let us know if you'd like to receive our weekly App Download Index.

EXAS |  Our Tracker has missed accelerating Cologuard volume despite a correlation in the high 90s largely due to the absence of Medicare claims from our data (and anyone else using claims based data).  We updated our adoption model for 1Q19 results which forecasts upside, but not until we get into 2020. Both the s-curve model and weekly claims update were published earlier today. Please let us know if you'd like to be added to the distribution list.

SGRY | Too small, a decent narrative, and a positive long term secular backdrop.  When we added SGRY to the short side at $14.15 on July 18, 2018, we called it a "A BAD HOUSE IN A GREAT NEIGHBORHOOD."  Here at $10 and we still have our concerns, but there are too many other ideas where we'd prefer to spend our time.  

CERN | It took a while, but both the market and management seem to have come around to our more subdued outlook for their markets.  With an activist on board, and expectations as low as they are, our incremental insights are likely far less likely to add value here.  

POSITION MONITOR | SAYING GOODBYE TO SOME POSITIONS | WHAT'S THE SCORE? - exas0513

POSITION MONITOR | SAYING GOODBYE TO SOME POSITIONS | WHAT'S THE SCORE? - DXCM0513

Thomas Tobin
Managing Director