Morning Memo: Friday, August 30, 2013

ICYMI...Later yesterday, we posted our latest in the series on the 'Obesi-fication" of America.  Take a look!  Share with others!!   Comment back to us!!  Thanks.

The "Obesi-fication of America": Part 2- DaVita HealthCare Partners (DVA)-Congress May Not Trim All The Fat

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

"Morning Memo" begins below this "NOTE for  NEWCOMERS" to "Morning Memo"...... Each morning, we post a short bullet-point list of noteworthy events, data, etc that find their way into the assessment of global markets.  It's far from complete and is not meant to be an exhaustive reconciliation of all things that could possibly impact stocks, bonds, currencies and commodities!  Rather, it's best viewed as a cryptic memo of "highlights", noteworthy items that took place in Asia, European and US hours.....and color-coded 'Red' for seemingly negative impact on equity markets, 'Green' for positive.
This will also serve as a useful review mechanism, as scrolling through the series of "Morning Memo" posts over time ought to summarily highlight what generally drove price action.  
We hope you find this useful and informative....and as always, that you'll share feedback!!
5:30 a.m. ET....

• Late yesterday, the UK gov't of David Cameron lost a vote in Parliament to take action against Syria!!  Equity markets initially appeared relieved by the news, though it leaves the US preparing to act without much company.
• Asia....UK's stepping back from supporting an attack on Syria sent gold prices lower and led to mixed equity markets with Nikkei off by 0.5%, but other markets slightly higher ahead of the long weekend in the US and in the context of monthend portfolio adjustments (aka 'window dressing').
• Japan inflation highest level in five years as Yen pushes up prices of imported goods.  The Nikkei, however, did not respond well as there was little sign of strong domestic growth, rather, mostly from exports.  July CPI rose 0.7% y/y vs 0.6% exp.  Industrial Production data fell short of expectations @ 3.2% vs 3.6% exp.
• India..Q2 GDP disappoints @ 4.4% y/y vs exp of 4.6% and previous quarter's 4/8%
• German retail sales disappoints, falling 1.4% vs expectations of a rise of 0.5% m/m.
• Italy..unemployment eases to 12%, slightly better than expected (record high was hit in May @ 12.2%) but youth unemployment rises to 39.5% up from 39% in June.
• Eurozone Unemployment rate @ 12.1% in July, stable vs June and up from 11.5% last year.
• Eurozone Inflation data better than expected at 1.3% vs 1.4% exp.
• US..Michigan Consumer Sentiment in August revised up to 82.1 vs 80.0 exp.but fell from July's reading of 85.1.
• US..Personal Income in line @ +0.1%, Spending disappoints @ up 0.1% vs 0.3% exp.
• more later.....

Please continue to visit Soos Global Market Musings for updates.
(Sign up to "Follow by Email"!  And share with others!)

(Please note: This article is solely meant to be thought provoking and is not in any way meant to be personal investment advice. Each investor is obligated to opine and decide for themselves as to the appropriateness of anything said in this article to their unique financial profile, risk tolerances and portfolio goals).
Disclaimer: Please read and consider important information related to all communication made by Soos Global on this site by clicking here.
Additional Disclaimer: currently long many stocks/ETFs and DVA.  Positions may change at any time without notice.

The "Obesi-fication of America": Part 2- DaVita HealthCare Partners (DVA)-Congress May Not Trim All The Fat

Last week, I posted the first part of a series on the topic on the "obesi-fication" of America.  (See link above or Tweet below)

Soos Global Market Musings: The "Obesi-fication" of America http://t.co/ivTnsVFgKc
— Ed L (@SoosGlobal) August 22, 2013

This post is Part 2 and updates some thoughts on DaVita HealthCare Partners (DVA), a major player in kidney dialysis centers. For starters, here's a Morningstar research description of DVA's business and a succinct statement of the pros and cons:

DaVita HealthCare Partners Inc operates kidney dialysis centers and provides related lab services mainly in dialysis centers and in contracted hospitals across the United States. It also operates other ancillary services and strategic initiatives.

DaVita's dominance in the U.S. dialysis market makes this company a standout provider in the health care industry, but the merger with HealthCare Partners, which now represents nearly one-fourth of revenue, has shifted a portion of its business model. The merger acknowledges the evolution of health care delivery in the U.S. and may offer some competitive advantages over the long term, but we're skeptical this deal will create shareholder value, as it also adds considerable operating risk. Despite the merger risks, we believe DaVita's strength in the U.S. dialysis market will remain the near-term foundation of the company's earnings potential and economic moat.

The stock peaked in May and took a serious tumble in early July on word that Medicare cuts could take a close to 10% bite out of their business.  Subsequent reports on America's struggle with obesity (which has been found to lead to diabetes which, in turn, often leads to kidney problems and the need for dialysis) did little to help the stock, especially in the face of the overall equity market's malaise in recent weeks. 

Today, however, there was a report which could augur well for the stock, reported in the NYTimes regarding many in Congress who are now not in favor of budge cuts that could hit dialysis patients so strongly.  To quote from the NYT article:

Eight months ago, Congress ordered the Obama administration to eliminate a stark example of federal government waste: more than $500 million a year in excessive drug payments being sent to dialysis clinics nationwide. But in a demonstration of just how hard it is to curb spending in Washington, more than 100 of the same members of Congress who voted in January to impose the cut are now trying to push the Obama administration to reverse it or water it down.

Reimbursement risk is a reality that virtually all companies in the medical and pharma related spaces face, and DVA, being one of two dominant players in the entire dialysis centers market in the US is clearly front and center with a reimbursement risk target on its back.  But Morningstar research makes a noteworthy point on this:

Patients covered by Medicare and Medicaid comprise 90% of DaVita's treatments and 66% of revenue, but margins on these patients are razor thin. The company's 10% commercially insured treatments therefore make up most of DaVita's reported profits.

There's nothing to say for sure that the stock has found a floor at the 108/109 area, but coming off the highs of close to $130/sh with DVA being one of two companies that collectively dominate almost 3/4s of the market share in the US, expanding their business internationally, and facing the opportunity (sad though it is) noted in the obesity statistics and charts that were posted in part 1 of this series (sourced from the Centers for Disease Control), DVA is worthy of close consideration.  
(Disclosure: We have an "entry level" position of 1.5% of the portfolio).
Stay tuned for updates on Washington's budget negotiations in coming weeks and on how that could impact DVA.

Please continue to visit Soos Global Market Musings for updates.
(Sign up to "Follow by Email"!  And share with others!)

(Please note: This article is solely meant to be thought provoking and is not in any way meant to be personal investment advice. Each investor is obligated to opine and decide for themselves as to the appropriateness of anything said in this article to their unique financial profile, risk tolerances and portfolio goals).
Disclaimer: Please read and consider important information related to all communication made by Soos Global on this site by clicking here.
Additional Disclaimer: currently long many stocks/ETFs and DVA.  Positions may change at any time without notice.

Morning Memo: Thursday, August 29, 2013

"Morning Memo" begins below this "NOTE for  NEWCOMERS" to "Morning Memo"...... Each morning, we post a short bullet-point list of noteworthy events, data, etc that find their way into the assessment of global markets.  It's far from complete and is not meant to be an exhaustive reconciliation of all things that could possibly impact stocks, bonds, currencies and commodities!  Rather, it's best viewed as a cryptic memo of "highlights", noteworthy items that took place in Asia, European and US hours.....and color-coded 'Red' for seemingly negative impact on equity markets, 'Green' for positive.
This will also serve as a useful review mechanism, as scrolling through the series of "Morning Memo" posts over time ought to summarily highlight what generally drove price action.  
We hope you find this useful and informative....and as always, that you'll share feedback!!
5:30am, ET.... 

• Asia equity markets rebounded, especially those that have been battered during August on tapering fears and more recently on Syria.  Philippines, Thailand and Indonesia, among the hardest hit this month, all traded up on the view that any US attack on Syria would be delayed, and on US economic data, mostly in the housing sector, that has been weaker than expected, thereby reducing fears of imminent Fed tapering.
• Japan's Nikkei up close to 1% despite July Retail Sales missing expectations, blamed on stronger Yen through the month.  Retail sales fell 0.3% despite expectations of a gain, and this is in the face of plans by the gov't to initiate a consumption tax in order to raise revenue!
• Indonesia...raised rates 50bp to 7% in further attempts to support the battered Rupiah.    
• India's Rupee rallied on gov't program to swap USDollars to oil importers in exchange for Rupee's, mitigating the need for oil importers to sell Rupees in the open market in exchange for USD.
• Philippines Q2 GDP @ 7.5%, better than expected.
• Brazil..late yesterday, raised rates 50bps to 9% in order to fight inflation and to support the weakened currency.  Fourth rate hike since April.
• (Editorial note:  just a reminder regarding the 'counter-cyclical' policy responses that we continue to see in Emerging Market countries as they grapple with weak currencies, higher inflation and high current account deficits.  A question to consider: could this be the early signs of a currency or debt crisis in the making?)
• Germany...number of unemployed climbed 7k, first time in three months.
• Spain..confirming initial estimates of Q2 GDP declining 0.1% q/q, 1.6% y/y.  These numbers are actually an improvement on previous quarters, so the country remains mired in recession, but slightly less so.
• Italy..business confidence data is stronger than expected.
• US...Q2 GDP revised up to 2.5% from initial 1.7%.
• US...Jobless Claims in line @ 331k.  (Editorial note:  before the open, equity futures gave ground on what appeared to be good GDP and Jobless Claims data, suggesting that the market is still in a "good economic news = more imminent tapering = bad for equities" mode.  But since opening, equities have been stronger, suggesting the economic data and the implied impact on earnings might be trumping tapering fears...at least for now!  The market appears to be increasingly divided over which argument should prevail).
• more later....

Please continue to visit Soos Global Market Musings for updates.

(Sign up to "Follow by Email"!  And share with others!)

(Please note: This article is solely meant to be thought provoking and is not in any way meant to be personal investment advice. Each investor is obligated to opine and decide for themselves as to the appropriateness of anything said in this article to their unique financial profile, risk tolerances and portfolio goals).
Disclaimer: Please read and consider important information related to all communication made by Soos Global on this site by clicking here.
Additional Disclaimer: currently long many stocks/ETFs.  Positions may change at any time without notice.

Morning Memo: Wednesday, August 28, 2013

"Morning Memo" begins below this "NOTE for  NEWCOMERS" to "Morning Memo"...... Each morning, we post a short bullet-point list of noteworthy events, data, etc that find their way into the assessment of global markets.  It's far from complete and is not meant to be an exhaustive reconciliation of all things that could possibly impact stocks, bonds, currencies and commodities!  Rather, it's best viewed as a cryptic memo of "highlights", noteworthy items that took place in Asia, European and US hours.....and color-coded 'Red' for seemingly negative impact on equity markets, 'Green' for positive.
This will also serve as a useful review mechanism, as scrolling through the series of "Morning Memo" posts over time ought to summarily highlight what generally drove price action.  
We hope you find this useful and informative....and as always, that you'll share feedback!!
5:30am, ET.... 

• Asia markets hammered!  Why?  Syria: namely, likely US military intervention in response to Syria's use of chemical weapons.  Not much more needs to be said re why markets are selling off.  Among the notable moves, India's Rupee hits new lows (could be worse one-day fall in 20 years, as per Financial Times), Indonesia's stock market drops another 3% after Monday's 4% fall, Nikkei down 1.6%, etc.  Emerging Market equity and currencies generally pummeled again!  While Syria is the word-de-jour, concerns of 'tapering' still present a key reason for why high current account deficit countries are suffering currently.
• Emerging Market indexes (& ETFs) hitting 7-week lows.
• Oil and Gold continue upward price moves.
• Bonds mixed: US 10yr Tsys @ 2.74% higher yield by 3bps, but Bunds @ 1.84% better by 1bp.
• European equity markets generally lower on the heels of US and Asia selloffs.
• Merkel..says Greece should not have been allowed into the Euro, blaming her predecessor. (Editorial note:  of course, this was stated at a political rally ahead of September 22 elections, in a country which has grown weary from bailing out peripheral Eurozone countries). 
• JPMorgan...US gov't is reported to be demanding a $6B settlement in their suit against JPM for allegedly mis-selling mortgage backed securities with false claims of meeting proper guidelines.
• more later...

 

 

Please continue to visit Soos Global Market Musings for updates.
 

(Sign up to "Follow by Email"!  And share with others!)

(Please note: This article is solely meant to be thought provoking and is not in any way meant to be personal investment advice. Each investor is obligated to opine and decide for themselves as to the appropriateness of anything said in this article to their unique financial profile, risk tolerances and portfolio goals).
Disclaimer: Please read and consider important information related to all communication made by Soos Global on this site by clicking here.
Additional Disclaimer: currently long many stocks/ETFs.  Positions may change at any time without notice.

Morning Memo: Tuesday, August 27, 2013

"Morning Memo" begins below this "NOTE for  NEWCOMERS" to "Morning Memo"...... Each morning, we post a short bullet-point list of noteworthy events, data, etc that find their way into the assessment of global markets.  It's far from complete and is not meant to be an exhaustive reconciliation of all things that could possibly impact stocks, bonds, currencies and commodities!  Rather, it's best viewed as a cryptic memo of "highlights", noteworthy items that took place in Asia, European and US hours.....and color-coded 'Red' for seemingly negative impact on equity markets, 'Green' for positive.
This will also serve as a useful review mechanism, as scrolling through the series of "Morning Memo" posts over time ought to summarily highlight what generally drove price action.  
We hope you find this useful and informative....and as always, that you'll share feedback!!
5:30am, ET.... 

• Asia...lower, following US markets selloff late yesterday on Secy of State Kerry's comments that the US is considering response to Syria's use of chemical weapons. 
• Philippines... catching up to other Asian markets' selloffs in recent days, returned from a holiday on Monday to drop over 4% in early trading.  Meanwhile, the Thai Bhat, India's Rupee and Indonesia Rupiah continued under pressure; so hopes that the carnage in emerging country currencies and stocks might be over as Fed tapering has been priced in do not seem to be met yet!
• IPOs (initial public offerings)..Interesting factoid reported in the Financial Times' fastFT, citing Dealogic's data on IPOs:  Asia ex-Japan IPO volume is at lowest level since 2005.  Hong Kong is an exception, posting higher volumes than last year.  Also,
  

  Globally, IPO volumes are up 25 per cent from last year. IPO volume in Europe has done particularly well—it's tripled from last year, to $14.4bn. 
  

•  Germany...IFO business confidence survey better than expected!  Increases for the fourth consecutive month. (the index is still below its historical high hit in Feb 2011).
• Europe..despite Germany's strong IFO data, the focus on US involvement in Syria is dominating attention and markets are broadly lower.
• US...Treasury Secy Jack Lew says debt limit will be hit in mid-October, roughly one month earlier than had been expected.  Puts more pressure on Congress, who returns from recess on September 9, to come up with a debt ceiling deal. (Editorial comment:  Bear in mind, in addition to the major issue of the debt ceiling, there's also the major issue of the US fiscal year ending September 30.  A continuing resolution to keep paying bills would be needed to avoid shutting down the government!  Negotiations on this should be intense).
• Case-Shiller Home Price index, up 12.1% y/y, in line w/expectations, but slightly slower on a m/m basis.  Still good report on housing front.  See CalculatedRiskBlog.com

 

 

 

 

 

 

 

 

 
 
 

 

 

 

 

 

 

 

 

 

 

 

 

•  more later...

Please continue to visit Soos Global Market Musings for updates.
(Sign up to "Follow by Email"!  And share with others!)

(Please note: This article is solely meant to be thought provoking and is not in any way meant to be personal investment advice. Each investor is obligated to opine and decide for themselves as to the appropriateness of anything said in this article to their unique financial profile, risk tolerances and portfolio goals).
Disclaimer: Please read and consider important information related to all communication made by Soos Global on this site by clicking here.
Additional Disclaimer: currently long many stocks/ETFs.  Positions may change at any time without notice.

Morning Memo: Monday, August 26, 2013

"Morning Memo" begins below this "NOTE for  NEWCOMERS" to "Morning Memo"...... Each morning, we post a short bullet-point list of noteworthy events, data, etc that find their way into the assessment of global markets.  It's far from complete and is not meant to be an exhaustive reconciliation of all things that could possibly impact stocks, bonds, currencies and commodities!  Rather, it's best viewed as a cryptic memo of "highlights", noteworthy items that took place in Asia, European and US hours.....and color-coded 'Red' for seemingly negative impact on equity markets, 'Green' for positive.
This will also serve as a useful review mechanism, as scrolling through the series of "Morning Memo" posts over time ought to summarily highlight what generally drove price action.  
We hope you find this useful and informative....and as always, that you'll share feedback!!
5:30am, ET....

• Asia mostly higher on the heels of Friday's US up-trade which was helped by weaker than expected New Home Sales data which in turn dimmed imminent fears of Fed tapering.  (Editorial note:  That said, reports show Street consensus looking for beginning of tapering in September).
• Also helping Asian markets were reports in China's Xinhua News that a gov't spokesman said the country will achieve it's 7.5% growth target this year.
• Nikkei was one of the few markets slightly lower.
• India...the Rupee staged an early rebound after last couple of week's bashing, but it didn't last long.  Pressure on the currency continues despite several attempts by the gov't to provide suppport.
• Thailand...exports disappoint.  This comes on the heels of recent data showing the country in recession.
• Europe...opened slightly higher, but faded and are now mostly in the red ahead of the US session.  Tapering talk still is front and center.
• UK closed for bank holiday.
• Middle East...nothing good!  Syria..Chemical attack allegations flying from both sides.  President Obama reviewing military options.  Late last week, rockets from Lebanon strike Israel.  Egypt...the 'non-coup' tensions continues. Oil firm to higher.
• US..Durable Goods...worse than expected largely due to big drop in airline orders.  Ex transportation also missed, down 0.6% vs flat exp.  Core capital goods fell 3.3%.
• more later....

Please continue to visit Soos Global Market Musings for updates.
(Sign up to "Follow by Email"!  And share with others!)

(Please note: This article is solely meant to be thought provoking and is not in any way meant to be personal investment advice. Each investor is obligated to opine and decide for themselves as to the appropriateness of anything said in this article to their unique financial profile, risk tolerances and portfolio goals).
Disclaimer: Please read and consider important information related to all communication made by Soos Global on this site by clicking here.
Additional Disclaimer: currently long many stocks/ETFs.  Positions may change at any time without notice.

Morning Memo: Friday, August 23, 2013

 ICYMI...See yesterday's post, a first in an upcoming series on the business of obesity in the US.

The "Obesi-fication" of America

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

"Morning Memo" begins below this "NOTE for  NEWCOMERS" to "Morning Memo"...... Each morning, we post a short bullet-point list of noteworthy events, data, etc that find their way into the assessment of global markets.  It's far from complete and is not meant to be an exhaustive reconciliation of all things that could possibly impact stocks, bonds, currencies and commodities!  Rather, it's best viewed as a cryptic memo of "highlights", noteworthy items that took place in Asia, European and US hours.....and color-coded 'Red' for seemingly negative impact on equity markets, 'Green' for positive.
This will also serve as a useful review mechanism, as scrolling through the series of "Morning Memo" posts over time ought to summarily highlight what generally drove price action.  
We hope you find this useful and informative....and as always, that you'll share feedback!!
5:30am, ET....

• Asia markets generally higher overnight led by a more than 2% surge in the Nikkei on a weaker Yen vs USD, and on the heels of yesterday's lower 4-wk moving average in US Jobless Claims and stronger PMI numbers in China and Germany.   
• China's markets were the exception, falling on liquidity concerns.
• Japan..Tepco shares fall hard on reports of new radioactive leaks from the tsunami damaged Fukushima plant.
• China...non-financial Foreign Direct Investment (FDI) into the country rose a faster pace in July, 24% y/y, $9.4Bn. (vs China's outbound direct investment $50.6Bn)
• Indonesia...the gov't formally lowered GDP estimate for the year to sub 6% fr prev 6.3% and announced new policies to deal w/sinking Rupiah.
• European markets are mostly lower after yesterday's strong day fueled by PMI data.
• Germany's GDP confirmed at 0.7%, in line.
• UK..Q2 GDP revised up to 0.7% fr orig 0.6%, better than expected.
• US..late yesterday, Moody's put Goldman, JPMorgan, BofA, Citi and Wells Fargo on review with implications for possible downgrade given an environment of less gov't support.
• US..New Home Sales disappoint!  lower than expected and downward revisions to prior months!  See CalculatedRiskBlog for details. 
• more later....

Please continue to visit Soos Global Market Musings for updates.
(Sign up to "Follow by Email"!  And share with others!)

(Please note: This article is solely meant to be thought provoking and is not in any way meant to be personal investment advice. Each investor is obligated to opine and decide for themselves as to the appropriateness of anything said in this article to their unique financial profile, risk tolerances and portfolio goals).
Disclaimer: Please read and consider important information related to all communication made by Soos Global on this site by clicking here.
Additional Disclaimer: currently long many stocks/ETFs.  Positions may change at any time without notice.

The "Obesi-fication" of America

I've shown these charts from the Centers for Disease Control before over the past couple of years in articles that I've written about companies (eg: Vivus (VVUS) and Davita (DVA)) involved in obesity drugs and related illnesses such as diabetes, kidney failure and kidney dialysis.  Each time I see updates of the charts, I'm no less stunned, nor less saddened over the tragic 'shape' of America's health.

From an investment perspective, the business of obesity and its illnesses, treatments and cures operates in various sectors from the more obvious healthcare and pharma, to technology, consumer discretionary and transportation.  Stay tuned in coming days/weeks for our latest investment thoughts in this space.

In the meantime, note that the data collection methodology was changed in 2011 such that it is no longer comparable to previous years. Therefore, I've included the longer term comparison of 2000 to 2010, and then the latest data from 2011 and 2012.
 

Percent of Obese (Body Mass Index >30) in U.S. Adults

Please continue to visit Soos Global Market Musings for updates.
(Sign up to "Follow by Email"!  And share with others!)

(Please note: This article is solely meant to be thought provoking and is not in any way meant to be personal investment advice. Each investor is obligated to opine and decide for themselves as to the appropriateness of anything said in this article to their unique financial profile, risk tolerances and portfolio goals).
Disclaimer: Please read and consider important information related to all communication made by Soos Global on this site by clicking here.
Additional Disclaimer: currently long many stocks/ETFs. No current positions in VVUS and DVA.  Positions may change at any time without notice.