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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.
In the US, we live in an age of abundance for sure. Back in the day we struggled with collecting actual stuff. From Pet Rocks and Ch-ch-ch-Chia in the 1970’s (still going with over 15 million sold as of 2019) through Cabbage Patch Kids in the ‘80’s and Beanie Babies in the 90’s, there has always been something people collect and then assign value through secondary markets.
As I’ve always maintained, people can and do make money by buying and selling virtually anything. See also gut microbiome, it used to go by another name.
Now days we are inundated with Covid-accelerated adoption of electron-based collectables and the markets that make them function in real time. From Dogecoin, today’s Pet Rock, to other crypto, to weed, to SPAC’s, NFT’s, and Reddit hype and hope messaging. A lot of this is simple recycling and repackaging of ideas for the electronic age. Some will last. Some won’t. The former will be called “real”, and the latter forgotten.
The herd has endless opportunities for self-entertainment and lotto-like ability to score big, just like in roulette thanks to Robinhood and others. Or not. Which is the usual outcome based on probability. It all seems like good fun until it doesn’t which will occur with the next crash. But, hey, don’t worry…every little thing gonna be all right. The game is score, cash in, and move.
Anymore the game is no longer even playing stock market. Admittedly, this feels like a good time to look at what and when to sell something. That said, conditions supporting the market moves persist for now. Fed promoting the loosest monetary policy in history over a very long time. Fiscal stimulus continues to ramp.
For an up-to-date analysis, see this week’s Healthcare Segment Scorecard below.
In the short term, out through one month, the healthcare complex (XLV) reasserted itself in the past week and is outperforming the broader market represented by SPY in that timeframe. But beyond that into the more sustainable intermediate term of 3-month performance, only providers ($DJUSHP) outperform the broader market. Over the past week, in each of five market sessions, XLV gained which often signals that sector rotation has turned toward XLV. Since the beginning of April, the XLV has shown good accumulation meaning buyers are accumulating shares faster than sellers are selling.
The provider group ($DJUSHP) is diverse but may be in general responding to favorable signals that non-Covid related patient care is returning. Among the large providers Centene (CNC) providing payer services to government sponsored healthcare programs gained +14% last week. DaVita (DVA) the dialysis services company gained +8.8%. Neither one had news particular to last week. Leading the big payer groups was Cigna (CI) gaining +4.9% on good earnings.
Other provider performers included Tenet Healthcare (THC) which gained +12.8% and Community Health (CYH) that gained +36.5% on the week. These appear similar to other reopen gains seen in other sectors of the economy that suffered difficult operations during the acute phases of Covid and are now skying.
Healthcare is a government regulated utility. Any indication that the government may move unfavorably in an area causes a sell now and figure it out later response. And so it seemed happened with the vaccine manufacturers after the news that the US would waive certain IP protections. The other dynamic seems to be that the flip side of reopen leading to these massive one-week gains is to punish areas that did well during Covid. Much of this is what seems to be simple recalibration. It should not impact our point of view for the long term. Good examples of negativity besides devices were seen in digital health that got pummeled.
As I See It: This is largely a momentum market again. The game is score, cash in, and move. Where is that Pet Rock.
May 10, 2021
Bob Teague, MD
Chief Medical Officer
Green Room Technologies
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