David Einhorn Short Athena Health: Sohn Conference Presentation ~ market folly

Tuesday, May 6, 2014

David Einhorn Short Athena Health: Sohn Conference Presentation

We're posting up notes from the Sohn Investment Conference in New York, produced in partnership with Bloomberg LINK.  Next up is David Einhorn of Greenlight Capital who pitched Athena Health (ATHN) as a short.

David Einhorn's Sohn Conference Presentation

Short a "Bubble Basket" as mentioned in Greenlight's Q1 letter

Deep dive into one of the companies without disclosing the others.

Athena Health (ATHN): Could fall 80% or more from recent peak. Provides software, services for practice management, claim processing.  Stock up big since the IPO.   He plays a video of selected clips of Jonathan Bush, the CEO which makes him looks really loopy, spouting off a bunch of buzzwords: SaaS, mobile, social, crowdsourcing, platform, monetize.

Have to believe revenues compound 18% per year for 15 years for it to be worth what it trades at today.  More clips showing the CEO who really seems foolish. They aren't really a software company, they are doing the work, reading the faxes, scanning documents, and storing them.

Should really compare this to ADP - business process outsourcing industry.  These businesses have 6.7%  to 14% operating margins.   Base case drops to $43 when you take out revs/doc which is too high, and margins too high.

Then he compares to EPIC which is winning in this space.  They are the standard - not the single digit cloud e-health records. (EHRs) More clips of the CEO that make him look a bit like a lunatic, almost like a parody.  Industry consolidation will shrink the market for ATHN, and they may lose more share to EPIC. 

Bubble stocks: best reason to own them is they keep going back up.  When they stop going up, they become falling knives.  There is a huge gap between this and when value investors will be interested in them.   Then he closes with a clip of the CEO bragging that they are trading at 21,000 times earnings, and that they are not worth that and that he forgot the question.

CRM, CNCR, ULTI, N, VEEV, WDAY, NOW were all on Einhorn's slide - maybe his bubble basket?  Basically all cloud/SaaS stocks.

Be sure to check out the rest of the presentations from the 2014 Sohn Investment Conference.

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