Adrian Warner Long HCA Healthcare: London Value Investor Conference 2018

We're posting up notes from the 2018 London Value Investor Conference.  Next up is Adrian Warner of Avenir Capital who pitched long HCA Healthcare (NYSE:HCA).


Adrian Warner's London Value Investor Conference Presentation

Prior to founding Avenir Capital in 2011 Adrian Warner worked in private equity.

Long: HCA Healthcare (NYSE: HCA):  HCA is a private hospital provider in the US with 179 hospitals, 38K staff, 47K beds. It has a strong  financial track record of growing revenue and margin stability. Margins have averaged 19% for over  20 years. It has leveraged 5% annual revenue growth into 15% annual EPS growth.

The bulk of the industry is not-for-profit hospitals or state/ local govt owned. Only 20% of hospital are for-profit in the US. In terms of inpatient costs per day for-profit hospitals have 24% lower costs, than not-for-profit. HCA is the dominant hospital provider in the for-profit sector with x2 the market share of the nearest competitor, Tenet Healthcare (THC). HCA’s scale and geographic focus provide a competitive advantage. It focuses on large urban markets which allows a greater focus on high-end subscribers. It has also focused on the sunbelt states which have large elderly populations.

Its industry leading capex allows it to attract the best physician groups. Its competitive advantage is demonstrated by long-term margin superiority, 19% Vs 10% for the industry average.  The hospital sector is expected to grow at around 6% per year. Even though there is a lot of regulatory noise, the Republicans failed attempts to pass health care reform in 2017 - with a majority in both houses - shows that radical change in the sector is unlikely.

HCA has grown through acquisition. The CEO believes the pipeline for potential acquisitions is good. Weak competitors provide M&A opportunities. HCA has bought back 20% of its shares since 2013.  EBITDA 7.7x; PE 10.7x; FCF yield 5.5%.


Be sure to check out the rest of the presentations from the London Value Investor Conference 2018.

David Tepper's Latest Interview

CNBC's Kelly Evans sat down with David Tepper of Appaloosa Management at Carnegie Mellon University recently.

Tepper said that the ECB and China surprisingly eased but his firm has been cautious on the stock market because of margins and other things.

He said that, "You have to keep some cash on the sidelines, have a diversified portfolio."  He also noted he doesn't love the bond market right now.

On General Motors (GM), Tepper said that it's leveraged to the US economy and they're doing better than other folks in China.  He thinks management is doing a good job there.

Tepper also likes HCA (HCA) adding to the position recently as he thinks it's been hit too hard.

Embedded below is the video of Tepper's interview with CNBC:



If you missed it, be sure to check out Tepper's previous interview from a few months ago where he said he was "not as bullish as I could be."

Graham & Doddsville Latest Issue: Interviews With First Eagle, Jericho & More

Columbia Business School is out with the latest edition of its Graham & Doddsville investment newsletter.  This issue features interviews with Matthew McLennan and Kimball Brooker of First Eagle Investment Management, Josh Resnick of Jericho Capital, and Harvey Sawikin of Firebird Management.

Additionally, they talk with Eric Yip and Mark Unferth of Alder Hill Management, and Rolf Heitmeyer of Breithorn Capital.

Lastly, the new issue features student investment pitches of: long Altice, long Fiat Chrysler, long HCA, long Genuine Parts Company, and long Precision Castparts (PCP).

Embedded below is the latest issue of Graham & Doddsville:



Be sure to also check out the previous issue of Graham & Doddsville including an interview with Bill Ackman.

Larry Robbins Focusing on Companies Deploying Capital

Institutional Investor has released an excerpt of their interview with Glenview Capital's Larry Robbins from the Delivering Alpha Conference.  In it, Robbins talks about how the market will react to the Fed releasing the 'training wheels.'

He says Glenview has been actively focusing on companies actively deploying capital, taking advantage of cheap interest rates, etc.  He likes companies that are "flush with cash, that have significant debt capacity, that are defensive and growing and that are trading at cheap valuations (maybe not as cheap as 2 years ago)."

For more from him, we've posted Robbins' 6 best ideas at the Delivering Alpha conference.

Embedded below is the video of Larry Robbins' interview:



For more from this conference, we've also posted an interview with Maverick Capital's Lee Ainslie.

Larry Robbins' 6 Best Ideas at Delivering Alpha Conference

At CNBC and Institutional Investor's Delivering Alpha conference today, Glenview Capital's Larry Robbins highlighted his six best ideas.

His stock picks were: Thermo Fisher Scientific (TMO) which has been his largest holding, Monsanto (MON) which he previously pitched here, as well as HCA (HCA), Hertz (HTZ), National Oilwell Varco (NOV) and Flextronics (FLEX), a position he added to in May.

He likes that all of these can raise money on the cheap and then buyback shares.  So basically, his favorite investment idea is a theme of companies levering up.

Also, today we highlighted that Robbins has been buying Carter's (CRI) shares recently too.

Glenview's Larry Robbins on Healthcare, For-Profit Hospital Stocks

At the Robin Hood Investors Conference late last week, Glenview Capital's Larry Robbins also made a rare media appearance on CNBC and talked about the Affordable Care Act, his healthcare investments, and other topics.

He articulated that the key focus on more Americans gaining healthcare is who is getting insurance versus how many.  He feels that people who actively use health services are the ones signing up first, which benefits hospitals (and he thinks managed care will have some issues).

On for-profit hospitals versus not-for-profit: "Regardless of what the competitive environment is, they (for-profit)  have fared better in the past and they will in the future."

On why he wanted Health Management Associates (HMA) to merge with Community Health (CYH):  "Consolidation is important, scale is important."

Touching on general market valuation, he noted that his portfolio is trading at lower multiples since that's what they've focused on.  But if you turn to the overall market, historically with low interest rates, the market trades at a higher multiple until real inflation goes above 4% he says.

Video 1 on the Affordable Care Act & healthcare in general:


Video 2 on for-profit hospitals (HMA, CYH, THC, HCA etc):


Video 3 on market valuation:

Larry Robbins' Ira Sohn Presentation: Long THC, HMA, HCA, LPNT; Short ITC

We're posting up notes from the Ira Sohn Conference.  Glenview Capital's Larry Robbins gave a presentation on going long/short various equities.

"How to cope with the market's electile dysfunction."
Disclaimer: do your own work.
Stresses now: Economy, liquidity, DC, legal review of Obamacare.
New highs: treasuries, utilities, defense.

He says long hospitals/life sciences, short treasuries/Utilities/defense.  We recently posted up why Robbins likes Life Technologies (LIFE) as well.

Long: Tenet Healthcare (THC), Health Management Associates (HMA), HCA (HCA), & LifePoint Hospitals LPNT

EBITDA has grown every year for hospitals, 9% CAGR, 1% admission growth, 3% pricing, 2% leverage, new hospitals 3%. "Affordable Care Act" is now 2409 pages, has 2 key legal questions: is the individual mandate constitutional? If not, is the rest of the ACA law, or is it all thrown out? If all thrown out, it's good for hospitals because some cuts come out.

Hospitals benefit from medicaid eligibility, reduces bad debt expense. At 6x eps, thinks worth it in any option. Worst case, no reform, 21% CAGR on eps, Medicaid expansion implies 28%, plus individual mandate over 30%. Half of hospitals are non-profit, just get by.

We flagged when Glenview bought more HMA in April as well as when Glenview started its stake in THC back in March.

For profit hospitals- can the government unilaterally take their profits from reimbursements? Not likely. P/E averages are 8.1x for the sector.


Short ITC Holdings (ITC)

Short this utility. Transmission company. FERC regulated. 60/40 equity/debt. Allowed 11% ROE, FERC allows 13.2%, so customers are overpaying by $260M to $550M.

No accounting issues, just getting a "sweetheart deal" that the regulators won't let this go on forever. If you cut their ROE by 194 bp, earnings get hit by 18%. Consensus EPS is $4.00, could really be $2.00, NI down by 20%, and share count up 60%.


P.S. - Don't miss other presentations from David Einhorn, John Paulson, Bill Ackman & more: notes from Ira Sohn Conference 2012.