Marrying Macro + Fundamental Equity Factors - z212

Front Running the Quants

We continue to enhance and refine our methods for finding high probability longs and shortsThe end result is a method that integrates the macro and fundamental equity factors in a repeatable and robust process. 

In our view, it has become increasingly untenable to focus solely on individual stock fundamentals. And yet, the top down / macro perspective remains too blunt a tool to be effective at the level of a single stock or subgroup. 

Combining these two perspectives has yielded tremendous results. It gives us the ability to bridge the gaps from Macro to the Insured Medical Consumer, to the US Medical Economy, and finally to single stocks.

Marrying Macro + Fundamental Equity Factors - ztom1

On a related note, my colleague Emily Evans and I are hosting a big call today at 10:00am ET discussing our best ideas, research updates, and policy trends that you'll need to succeed in 1Q 2020. If you are an institutional investor interested in learning more or accessing our call email

Key 1Q 2020 Health Care Themes

Health Care Labor Demand

US Medical Economy | Growth trends turned positive September 2018 and have remained solid over 2019. It wasn’t until 3Q19 that we finally saw these trends clearly in earnings and stocks.  It helped too that “Medicare for All” fears faded, and the Hedgeye Macro went from Quad 4 into Quad 3.  Heading into 2020, the script has flipped.  Growth is good, but evidence of acceleration is scant.  In rate of change terms, the deceleration hitting the US Medical Economy now will likely materialize in the second half of 2020.

Marrying Macro + Fundamental Equity Factors - ztom2

Health Care Policy

Insured Medical Consumer Model | Medicare Advantage growth exceeded forecasts at the HHS Office of the Actuary, with PPO plans being the biggest winners, and suggesting federal policies favoring MA plans over traditional Fee-for-Service are working. Meanwhile, slowing growth in employment mean little upside to employer-based insurance.

Election Politics | The durability of Sanders versus Biden makes for a compelling countervailing narrative against the undeniable rise in health care utilization. Biden’s prospects as nominee should be more clear in Q1.

Price Transparency and Interoperability | From EHR vendors to hospitals to health plans, everyone is trying to stop the Trump administration from filling their moats with interoperability rules and price disclosure. These issues may come to a head in 1Q in court or through final rule-making.

Marrying Macro + Fundamental Equity Factors - ztom3

If you are an institutional investor interested in learning more or accessing our call email