Checking In on Our Favorite Whipping Boy
Health care stocks are struggling... Stansberry NewsWire readers aren't surprised... Checking in on our favorite whipping boy... 'Demand has fallen off a cliff'... Your last chance to watch a FREE replay of the Empire Investing Summit...
Regular Digest readers are familiar with our colleague Thomas Carroll...
Earlier this year, Thomas joined Stansberry Research as the editor of our recently launched Cannabis Capitalist advisory. However, he also has vast experience in the broad health care sector.
In fact, before joining our firm, Thomas was one of the most respected and longest-serving health care analysts on Wall Street. He worked at Legg Mason and then Stifel Financial in Baltimore for nearly two decades.
Thomas' research was used by institutional investors, newswires, and health care-specific publications. It was also featured on CNBC, Bloomberg, CNN, and Fox Business. He was consistently ranked highly in industry stock-picking awards, including top five finishes from StarMine, the Wall Street Journal, and Forbes. And he was even named as the No. 1 U.S. health care analyst by Fortune magazine.
In short, Thomas knows the health care sector like few other analysts in the world...
So when he and Stansberry Newswire editor C. Scott Garliss warned of potential trouble for health care stocks back in January, we took notice. As they wrote on the Newswire on January 23...
While the 2020 presidential elections feel like they're a long way off, they're not. Already, Democratic candidates are declaring they will be running for the office and the all-important Iowa caucus is little more than a year away. So, candidates are already raising money and focusing on potential issues.
Given the recent ruling by a judge in Texas that the Affordable Care Act (ACA) or "Obamacare" is invalid, the interest in reforming the health care system is on the rise.
So, what's our team's take on the implications for health care stocks? As we get closer to 2020 and the subject becomes part of the election-year debate, it may reduce interest in health care stocks – mainly the companies directly responsible for the structure of the system.
In other words, fewer money managers will be interested in investing in the group due to political uncertainties.
They warned that all health care stocks could be pressured in the coming months...
However, they singled out two groups in particular that were likely to struggle the most. More from that dispatch...
The main sectors to keep an eye on are the managed care organizations ("MCOs") and hospitals.
MCO plays: Anthem (ANTM), UnitedHealth (UNH), Cigna (CI), Humana (HUM), CVS Health (CVS), Centene (CNC), Molina Healthcare (MOH), and WellCare Health Plans (WCG).
Hospital plays: Community Health Systems (CYH), HCA Healthcare (HCA), Tenet Healthcare (THC), and Universal Health Services (UHS).
Scott and the NewsWire team reiterated these warnings several more times over the next few months...
We hope you took notice as well.
Since their original note in January, virtually all of the managed care stocks they mentioned have suffered significant declines.
For example, both Cigna and CVS Health have fallen more than 18%.. Centene is down nearly 17%... Humana has fallen 14%... and UnitedHealth has dropped more than 11%, just to name a few.
The four hospital stocks they mentioned haven't fared much better. Of the group, only Tenet Healthcare is positive, with a 14.2% return.
Meanwhile, the broad market – as tracked by the S&P 500 – has risen 17.5% over the same span.
Kudos to Thomas and the entire NewsWire team for the prescient call long before it made headline news...
Newswire editor John Gillin shared the team's latest thoughts on this trend in an update earlier this month...
The health care debate will be on the front burner for the 2020 election... Change is necessary, but there is no defined plan. Health care for all is inspiring on a campaign button, but not a feasible alternative to the status quo. That's the problem...
With Congress turning its attention to the health care sector, there is heightened regulatory uncertainty surrounding the space... This makes the space "uninvestable" for the near future.
Please stay with us. Health care investing is a minefield, especially with Washington setting its sights on the industry, and we will help you navigate.
If you're not yet reading the Stansberry NewsWire, you can sign up for free right here.
Switching gears to our friend Whitney Tilson's latest thoughts on Tesla (TSLA)...
Last Wednesday, we mentioned that Whitney remains as bearish as ever on the electric-car maker.
As regular readers know, Whitney called a top in Tesla shares earlier this month, warning that CEO Elon Musk's "luck" had finally run out.
Following the company's "terrible" first-quarter earnings report on Thursday, Whitney prepared a detailed update for subscribers of his brand-new Empire Investment Report.
Because he knows many Digest readers have been following his thesis closely, he has graciously agreed to let us share a portion of it here today. From the update, which was published on Friday afternoon...
[Tesla] reported a $702 million loss in the first quarter – double consensus expectations – and guided for another loss in the second quarter.
It was so bad that Wedbush analyst Daniel Ives, who was once bullish on the stock, wrote: "To this point, in our 20 years of covering tech stocks on the Street we view this quarter as one of top debacles we have ever seen, while Musk & Co., in an episode out of the Twilight Zone, act as if demand and profitability will magically return to the Tesla story."
Ives said he was "throwing in the white towel" and downgraded the stock.
The cash flow statement was equally bad, as the company had negative $640 million in cash flow from operations. It spent an additional $280 million in capital expenditures, for a total cash burn of $920 million.
That's a huge reversal from the previous quarter, when Tesla reported $210 million in profit and generated positive $1.24 billion in operating cash flow. That led Musk to say on the conference call less than three months ago that he was "optimistic about being profitable in Q1 and all quarters going forward." Oops.
As bad as Tesla's quarter was, Whitney noted that it could've been much worse...
More from his update...
Musk admitted on the conference call that "over half of our global deliveries occurring in the final 10 days of Q1. This was the most difficult logistics problem I have ever seen and I have seen some tough ones. So I will say it again... We literally delivered half of the entire quarter's deliveries were in the final 10 days of Q1. That's insane."
For once, I think Musk is telling the truth. I agree with him: It is insane to deliver more than half of a quarter's deliveries – worth roughly $2 billion – in the last 10 days.
And unfortunately for Tesla bulls, Whitney sees no signs the coming quarter will be any better...
I'd be willing to overlook Musk's erratic behavior, the operational chaos, executive departures, etc. if Tesla's cars were still selling like hotcakes.
But all of the evidence I can find shows that, now that Tesla has fulfilled the backlog for the Model 3, demand has fallen off a cliff.
Musk has promised that deliveries will rebound strongly from the first quarter's dismal number of only 63,019 cars to between 90,000 and 100,000. But I think the company will be lucky to match that number of deliveries in the second quarter.
Of course, terrible 'earnings' and falling demand aren't the only reasons Whitney is bearish on Tesla...
In total, he prepared 15 pages of detailed analysis reaffirming his stance that shares will plunge by more than 50% before the end of the year.
It wouldn't be fair to Whitney's paid subscribers to share it all here. But you can get instant access to this update – along with all of his research and current recommendations – with a subscription to his Empire Investment Report. If you have a short (or long) position in Tesla, this single report alone could more than pay for the cost of this service.
Better yet, until tomorrow night at midnight Eastern time, you can still take advantage of a 100% risk-free charter offer to try this service at a huge discount. Click here to get started now.
New 52-week highs (as of 4/26/19): American Express (AXP), Blackstone (BX), Blackstone Mortgage Trust (BXMT), First Trust Nasdaq Cybersecurity Fund (CIBR), Disney (DIS), Hannon Armstrong Sustainable Infrastructure Capital (HASI), Hershey (HSY), KLA-Tencor (KLAC), iShares iBoxx Investment Grade Corporate Bond Fund (LQD), MarketAxess (MKTX), Microsoft (MSFT), NetEase (NTES), Starbucks (SBUX), Travelers (TRV), and W.R. Berkley (WRB).
Several readers weighed in on Porter's latest "must read" Friday Digest. As always, send your notes to feedback@stansberryresearch.com.
"I rarely comment on the Digest but always enjoy the thoughts of those who write it. Porter's comments are generally spot on in my opinion and I appreciated his comments on April 26. We have been able to create the largest and most prosperous 's-hole' country ever through total corruption, the election of s-hole representatives and the most corrupt President ever (a high bar indeed). Add in insanity in the financial markets and the welcoming and embrace of companies so deep in debt they could never, ever get out and you have, as Porter says, the most colossal crash ever imagined or feared. Good luck and as those of us who grew up on a farm say when walking across a field full of cows, keep one eye ahead and one eye on the ground." – Paid-up subscriber Bob E.
"I've been a longtime Alliance Member and appreciate the energy that goes into all the publications that Stansberry publishes. The massive growth of credit at many levels in the economy and how you 'manage it' remains a mystery to me. (I spent 12 years with Citibank in London, Greece and New York). I cannot see a workable solution to bring it back to a 'normal' range. Porter listed many extremes and perhaps the bottom line is that all the 'experts/genius creators of new apps/etc' are only there to 'cash out' to the next 'greater fool.' We, Stansberry clients, should avoid being in that role through Porter and his team's educational advice." – Paid-up subscriber Michael S.
"Dear Porter, thank you for taking the time to talk with us again in your Friday Digest. When I first joined Stansberry Research 14 years ago, I salivated as if awaiting the steak on the grill with each week's end, looking forward to your Digest. I am so thankful that you 'saw the light' and cut back to regain your health. I am thrilled to get a glimpse into your thinking once again. Stansberry's Credit Opportunities has been all you said it would be, and your balance of expert analysts offered at Stansberry Research provides each of us subscribers choices that best suit our financial situation. No one can predict precisely what will happen in the future, but you have taught me a master's degree of information to prepare me for the inevitable downturn. I'm not a financial whiz kid, but I'm better off than I was 15 years ago thanks to you." – Paid-up subscriber Betsy B.
Porter comment: Betsy – your note made my day. Thank you for your kindness and encouragement.
Regards,
Justin Brill
Baltimore, Maryland
April 29, 2019