Nobilis Health Corp (HLTH)

The bigger trend on the stock is down. There is some appearance of bottoming taking place. The lows were slightly lower. At this point he probably wouldn’t touch this. He would like to see it break the sideways movement and break out at around $6, and start to move up.

It got way ahead of itself. It came down with bad news on healthcare stocks. They switched auditors and their stock is down due to delayed financial statements. He is not expecting any bad surprises.

(A Top Pick Dec 10/14. Up 13.8%.) Chart shows it has had a pretty rocky road. It was 3X as high as where it is now. A company that has executed fairly well, but needs to prove their numbers out. A Short Seller’s report came out, but they were able to refute all his points. Then they had an auditor change, which really dragged their feet in getting the financials done, so they were late with their accounting. If you don’t own this, you certainly want to watch it. Once the accounting issue is finalized that will be the 1^st step. The 2^nd will be their next quarter of earnings to make sure they meet expectations that management has put out.

(Market Call Minute) It is cheap, although controversial.

He was buying this because of a profound overreaction to a Short report that came out. He sold after he had about a 33% run when the company came out with an announcement that they had hired a fairly respected attorney who discredited the report. This is a name he might revisit early next year. He doesn’t like the excess of volatility.

(Market Call Minute.) Has been beat up too much by Short Sellers, but there are still some fundamental issues here and it is still a risky sector, and haven’t proven themselves with the delay of their numbers.

He has not seen too many instances of companies being successful in this kind of law suit. They really put the numbers up and hit the guidance they said they would hit. They have a new auditor, who has some issues with converting some things from IFRS over to GAAP. Once that is cleared up and if they hit their Q4 numbers, then the stock will regain some of the lost ground.

He can’t stand companies that sue short sellers. It does not give you a lot of confidence.

The bigger picture is bearish. It is a short term trade. The top of the current range is old support of $6-$7. It looks like a pretty good trade from here.

In healthcare, you have had Short Sell reports coming after a variety of the Canadian names. The company came out today to try to dispel those rumors and the myth about what was being put out there, and the stock rallied pretty sharply with a 20% gain on the day. He thinks the stock will recover. (See Top Picks.)

They are relatively small in the scheme of things. The reaction is overdone on the selloff side. It is sometimes hard to recover from this kind of thing. There are others in the sector that are large caps and more reliable.

An anonymous blogger came out with an 8 page report, 95% of which is probably containing massive fallacies, incorrect statements and bad math. Because of Valeant (VRX-T), sentiment towards healthcare stocks is dismal. The new CEO owns a boatload of shares. Stock was down another 15% today on the announcement of a class-action lawsuit from some ambulance chasers in the US. The challenge is, if you lose your market multiple, you are kind of pooched if you don’t have a good business. This company thinks they can grow organically next year by 20%. If you believe, anywhere remotely close to their production for EBITDA next year, it is trading around 4-4.5 times to EBITDA. They have organic growth. He bought some today.

They are going to try to go after these guys that wrote this screed. Evidently there is a Toronto-based hedge fund that is implicated. He thinks they are going to put up good earnings shortly, and eventually people will ignore the stuff. He hopes the OSC will do its job; he is not waiting for the Calvary. At the end of the day, this company has great earnings. If their stock doesn’t start moving, they have enough cash that they can just start buying it back.

This was taken down 25% on Friday on a bearish seeking Alpha Post, written by a Short seller. They basically rehashed a bunch of old information about the company. The company has come out and said there was nothing going on and there were no material changes. The post created some inaccuracies. Stock was up more than 300% and is a relatively highly traded retail company, and was really ripe for a Short attack. The moral is, “Don’t panic on a long weekend.”. He has been a bit cautious on this company.

It is not well covered by analysts. They made a number of acquisitions. He thinks the stock will move up here.