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As entrepreneurs who aspire to either become a publicly traded company or be bought by one, understanding the dynamics of the public markets is fundamental to achieving your ultimate liquidity goal. It is one bookend of valuation.
As we continue through market adaptations in the Age of Covid it has become common to comment upon market resilience. Perhaps this reflects our own. Corrections when they occur have remained contained by the algos that buy the dips.
Other characteristics of this period have included corrections in overbought sectors or instruments resulting in mechanical rotations among industry groups based on relative valuations, tic-by-tic machine-traded binary reciprocal relationships like predicted inflation and growth, minor pullbacks, continuation patterns of various lengths, and headline-reading machines that cause air pocket events like the reaction to the announcement that the current administration may want to raise taxes. Only the algos were surprised apparently.
Somehow this has all happened without precipitating a major crash or correction even in QQQ. The constant rotation seems to be causing performance convergence across multiple indexes.
Taking the market from a perspective of one month shows the performance convergence with SPY +6.99%, QQQ +7.00%, MDY +8.56% and IYT + 8.81%. Weekly rotations aside, this combination of positive outperformance is a good platform for bullish continuation especially if current technical features resolve upward which is partly dependent on earnings and evolution of adaptive Covid macroeconomic picture without any new disasters.
What’s a market to do? Both monetary and fiscal policy are set to promote economic growth. Both markets and individuals by these machinations have so far contained corrections when they have occurred.
For an up-to-date analysis, see this week’s Healthcare Segment Scorecard below.
Healthcare (XLV) gained for a second week at +1.81% and was the second-best performing S&P sector. For the past three months, or in the intermediate term, healthcare stocks have been incredibly weak except for providers ($DJUSHP). Besides a large increase in price momentum for XLV another indication of strength has been net stock accumulation for about the past month. This is still considered short term but suggests a longer upward move may occur.
Leading the provider space over 3 months have been large cap players Anthem (ANTM) +22%, HCA (HCA) +22%, and United (UNH) at +16%. The leader in the Small cap area was The Joint Space (JYNT) the chiropractic operator at +82% over the three months. Surgical Partners (SGRY) the integrated surgical services operator was +56% while senior living centers like Capital (CSU) and Brookdale (BKD) also booked big gains. This all seems indicative of both recovery of more business-as-usual care activity as well as good adaptive execution through an extreme period.
The sector that seems to be picking up a significant momentum is equipment ($DJUSAM) at +12% over one month vs. SPY at +7%. This sector has had great growth over the past five years and has been second only to supplies ($DJUSMS) over the trailing 12 months while underperforming SPY. Leading the large cap equipment companies for the week was Intuitive Surgical (ISRG) the minimally invasive and robotics firm that gained +7.75% on a good earnings report. Over one-month ISRG is up +23%. This appears to be an early indication of increasing activity in procedures and care delivery as Covid care decreases.
As I See It: The bull continues with a remarkable resilience by algos either buying on dips or selling extreme activity and valuations even in the themes and memes (crypto, SPACs, NFT’s and Reddit stocks). As with all trends, they continue until they don’t. Stay tuned.
April 26, 2021
Bob Teague, MD
Chief Medical Officer
Green Room Technologies
Send comments or questions to firstname.lastname@example.org
Leveraging technology to improve process and outcome, Bob’s career spans clinical practice and executive leadership in Fortune 50 enterprises and prominent healthcare institutions along with experience in the public markets and entrepreneurial startups.
Bob is board certified in Internal Medicine and Pulmonary Disease, practicing in the Texas Medical Center for 20 years, and has held leadership roles at Compaq, Dell, and Quorum Health Corporation.
His entrepreneurial experiences were financially successful enterprises that were transformative in their markets for respiratory home care, diabetes chronic care management, healthcare interoperability and Medicare Advantage risk management through transitional care and high risk patient management.
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