CRH Medical Corp. (CRH.TO)

He exited this story. He was a big bull. It came back for stock specific stories. Multiple compression resulted from short reports.

Had a tremendous run up to about $12, but got completely blindsided, and it pulled back heavily. Got stopped out around mid-$6. Thinks they are going to be okay long-term. There were some issues with insider selling at higher levels. If you own, continue to hold as it looks like it has bottomed.

It had an amazing run this year. It was a target of some short sellers, and then they missed on some earnings reports. It is the worst for price momentum. It is actually okay on valuation. It has a decent balance sheet. It is volatile and has poor price momentum.

It fell apart and is now working itself back. It got destroyed by credibility, short sellers came along and the stock has readjusted. He thinks the worst is over. It has earnings potential.

A stock that is extremely popular with medical analysts. There has been a bit of a foul-up in performance and the stock has joined the Bear market. He doesn’t get the sense that it is as good as a lot of analysts seem to believe. You also have the setback of the Obama-care saga in the US.

Provides anaesthesia services for gastro-intestinal procedures. They operate in the US, and Medicare and Medicaid are evaluating what people can bill for services. The company has said that the net impact will probably result in an 8% decline in revenue and a 16%-18% decline in EBITDA. When the news broke, the shares dropped about 50%-65%, so it is getting to a time where it has probably been a little oversold. This is going to be higher risk, so you need to be able to withstand 5% moves on any given day. They just did another acquisition and there is a hint that they will be doing many more.

This has been hit extremely hard. It trades to a pretty significant multiple and probably got ahead of itself. On the news and speculation that some kind of reimbursement was going to come, the stock sold down. The code changes are not being reimbursed to the same degree. In the past, they’ve been able to use their currency to a certain degree to make acquisitions. They have just secured a bigger line, so it looks like they’ve shored up their business fairly well. Fairly good cash flow. The reimbursement is going to hurt them, and then the private pay insurance, the majority of their business, will end up coming down over time as well. They are going to have to replace the lost revenue with increased business, either organically or by acquisition.

News items make it difficult for anyone to analyze. They have one of the best returns of capital. The rules have changed. Probably it is okay. Usually the rule changes sound more threatening than they really are.

He has no price target. It is another great Canadian healthcare stock that got hammered a short while ago. The reason for the most recent decline is that Central Medical Services has changed how they code some services. This company should eventually be at higher prices, but he wants to see the dust settle.

An outsourcer in medical clinics where they take a 50% stake in the business. Registered nurses are being paid as full medical doctors. Their profitability could be hit when they are re-rated. The argument goes on. He thinks the short thesis is a little overplayed.

When a Short report came out, this dropped about 30%. Had sold about half his position in the $11 range to take some risk off the table. The stock is now close to the level, where if it breaches it, he will be selling his position. Believes their business is strong. He likes the company, but is just a little worried about it technically right now. On a P/E ratio, they seem really expensive. They have a nice ROE.

Going ahead 3 or 4 years, he is pretty comfortable that the whole medical space will be higher. We are in a secular bull market with healthcare. It had a big spike down this year, but the range we are in now has provided some support. There was a low of $6.84 in May, but doesn’t think it is going back there. It seems to be basing around $7.23-$7.38. Look for this to break out at around $7.65-$7.73, which will tell him it is really getting some legs. It is probably going to base here for a while.

(Top Pick Jun 30/16, Up 52%) It was almost $12 at one point and was really stretched, then a short report came out, all before he bought it. He likes the business and feels they will continue to do well. They have great cash flow for acquisitions.

This got up to $11-$12, where he thought it was a little ahead of itself. Markets were jittery and someone came out with a Short report, so a lot of Shorts piled on and the stock came off quite a bit. At the current value of around $8, it looks half decent. He is comfortable with management.

A recent Short report made some interesting points. Although he doesn’t like serial acquisitors, he likes that this company is very focused on what they are doing. When they make an acquisition, they typically get 50%-51% of the business, so they consolidate it. Their revenue numbers are generally growing much faster than their earnings because they have to take out the minority interests. They are recognizing 100% of the revenues, but effectively are only getting 51% of the earnings. That was one of the thrusts of the Short report. The other was that they were being paid to use an MD to administer their deep sedation (used in colonoscopies), but using specially trained professional nurses instead. A decent company, he is just not sold on it yet.