I don’t mind going out on a limb – so some projections regarding Community Health & Tenet. #1 – Tenet is history as a stand alone company. Trading volume Friday was more than half the capitalization of the company. The arbs and hedge funds are loading up in a big way and they will get to vote. Company is gone. #2 – The price is probably in the $7.50-8.00 per share range, but could be higher. The synergies and margin upside is so great in this company that CYH can use more stock and others can use cash to buy Tenet. Tenet has a bloated infrastructure and bloated bureaucracy that can be rationalized. #3 – Other bidders could emerge. Let’s run through the possibilities: HCA – unlikely. They want to go public. If they wanted the company, they could pay as much as CYH, or more since they are private. HMA, UHA & LifePoint – no way. Bill Schoen doesn’t like big transactions at HMA. LifePoint too small. Alan Miller just bought Psyc Solutions and he really prefers the psyc business to the acute care business. Vanguard. I’m certain that Charlie Martin would love to own Tenet. Two ways to …
New Bull Market in Hospitals?
The bull market for hospitals was restarted on Friday. As you probably will recall, I talk a fair amount about the seasonality of the hospital stocks and we are going into the seasonally strong period which lasts through some time in May. The reaction to the Community Health offer to buy Tenet was astounding .. not on the Tenet side but on the CYH side. CYH traded down $1.40/share after the announcement and opened down. Then the stock roared up 13% on the day, trading up $4.25 on the close, over 5 ½ points higher than the low. HMA was up over 4%, Lifepoint over 5%. Some of these gains were probably due to an expectation that a new consolidation phase may have begun, but I think more likely is that the hospital stocks are well under valued relative to historical levels. The 5 major public companies are trading at 7.1x LTM EBITDA and 0.90x revenue. While that’s higher than it has been in the past year, these stocks have historically traded 25% higher. The other positive for 2011 is that this sudden increase in hospital focus should allow HCA to complete its IPO which I think would be very …
The Real Estate Guys
Robert, Russ — Great to be on your show talking about St. Kitts and the opportunity to create a medical school and healthcare delivery system in the Caribbean. I look forward to being with you next month in Belize to check out the healthcare system there and to meeting you and your clients on St. Kitts in April 2011. The Real Estate Guys are sponsoring a cruise focused on real estate investing in April. Their last stop is in St. Kitts and we will meet the ship and personally escort his clients to see this great island nation. Check out The Real Estate Guys at www.realestateguysradio.com. My interview was broadcast on July 25th — click here to listen to the show. Thanks guys — we have a conference call in 30 minutes — look forward to speaking again. Jeff Check out the St. Kitts Project tab at the top of this page !!!!! You a doctor? At the bottom of the St. Kitts Project tab page is a link just for you, or you can Click Here. Be part of what could become the most amazing adventure in the Caribbean.
Thank You Freedom Fest 2010
Last night was the conclusion of Freedom Fest 2010 at the Bally’s Casino in Las Vegas. The quality of this program was astounding and I congratulate all who were involved. You haven’t lived until you see Steve Forbes dressed up as George Washington in one of the skits at the closing banquet. We live in unique and dangerous times. As I’ve written to my clients on all too many occasions, the investment decisions that we make in the next couple of years will be the most decisions that we will ever make in our lifetimes. Get it wrong and we may be financially ruined, regardless of how many financial resources we have today. Get it right and even modest investors can make millions, securing the financial future for their families today and for generations to come. If you have never heard of Freedom Fest, click on this link and see what you missed. Something like 160 presenters over three days. I’ve been to lots of conferences and heard lots of speakers. The quality of the speakers at this conference was impressive. And the conclusion is unmistakable: the United States and most of the major countries around the world are on …
CMS goes after Oxygen
After quite a long time of silence, CMS weighed in with a massive 30% cut in oxygen reimbursement in 9 competitive bid markets. CMS has been trying for a couple of years to have providers compete for business based on price. After a court setback, CMS is back. The plan expands to cover 91 more MSAs in 2013 and the rest of the country in 2016. The cut was far worse than expected and again shows that oxygen services are over priced. The largest public company in oxygen, Lincare has argued, and probably correctly, that a big cut like this will allow it to gain significant market share. No argument there. Yet earnings are going to be under pressure and after a double in the stock it is quite vulnerable. Time to be very cautious in the markets. The world’s debt problems are being recognized and the result will be a no growth world economy. The expectations of a 3%+ recovery will be an illusion. World governments are cutting spending and China has a real problem in a real estate bubble that dwarfs the U.S. bubble. Time will tell, but it could get really nasty and July is historically a …