Patient Home Monitoring (PHM.V)

It is amazing how emotion swings from one extreme to the other. Back in May, Michael Dalsin was really King of Bay Street. Casey Hoyt is the new CEO, and he has a fantastic track record of growing the business. Has been adding to his holdings. They are doing a fantastic job of executing on the business plan. There is a lot of value in this company. It will probably take a quarter or 2 for investors to take a look at the actual numbers and realize that management is doing what it said it would do. Super cheap right now, probably trading at 5 or 6 times its 2016 EBITDA. Thinks it has a strong future ahead of it.

This had a strong run through 2014-2015. When you are doing growth by acquisition, you have to be able to execute on them. It pulled back down significantly. It is difficult in this type of environment. When the market is doing really well, there is a lack of opportunity for Canadian investors to go into other places. With energy doing so poorly, a lot of growth by acquisition stories were favoured. Chart shows a big correction that has taken place followed by a little bit of a bounce. He would wait for it to show a little bit more strength before stepping in.

They did something weird with their stock and got it a bit wrong. It doesn’t change his thinking on the company. This has the best formula that he has seen in the huge jungle of small tech related, healthcare companies.

There is a financing attached to it and the buyers can’t trade until Sep 8^th. He thinks there will be some selling after that date and then he would look to buying.

He is struggling with this. The market has to get comfortable with the new CEO in terms of whether they can deliver on their M&A acquisition targets. If they can, the stock is very, very cheap. At the same time they have about an 8%-10% organic growth.

The reality is that they have made the mistake of over promoting themselves. They should stop talking to the Street and the market, take the 8 companies they have acquired, get them consolidated and put up some earnings. We need to see operational excellence. The stock is cheap and has been oversold, and it will go higher from here. Becoming a managerial story as opposed to a Capital Market story. Don’t go aggressively buying this stock.

This is the topic de jour in Canadian investments right now. The line from Wall Street is probably the best. “Don’t get emotional about stocks.” The Shorts have run a great Short program and made a ton of money on it. If you peel back the onion and take a look at what has gone on, the business has not changed at all. Their business is just as strong or stronger. As some point the market is going to move away from the emotional aspect and start to look at the business again. Management is guiding towards having $200 million of run rate revenue at the end of this year which is $50 million of EBITDA. Putting a 10X multiple on that, it is a $500 million enterprise value, and is currently about $200 million today.

He recommends that you draw a trend line and look at the 50 day moving average before jumping into a stock. This stock broke the uptrend line and now it is in a downtrend. There is no double bottom and there is no sign of support. It may stop at 50 cents but he doesn't know. At this stage, it is a falling stock.

This stock has been taken out to the woodshed. There was concern that insiders had sold a chunk of the stock. That seems to give you an opportunity. Likes the underlying business. Earnings for a June fiscal year is expected to be $0.11 this year with growth next year. That gives you a 9.4X PE and a 7.4X Price to Cash Flow. Looks cheap, but the underlying mechanics of the business and fundamentals are in good shape.

This has been a victim of a big selloff. Still continues to be his favourite stock in the small Pharma sector. It simply buys lists of people that need to be monitored at home with gadgets and also does cross selling. It continues to keep buying other operations in the US, which are immediately accretive to earnings. Their target in revenues is $200 million and he has no doubt that is where they’re going.

Always had some misgivings about this company given how popular it was. From what he has read, revenues were up $21 million last year, and were predicting $175 million this year, with the future of $1 billion. If that isn’t “pie in the sky”, he doesn’t know what is. If a company grows that much, you have to question what is the margin and what is the bottom line. Usually, if this is done by taking over other companies, they often run into problems. In this case, they did a stock offering in May, and within 2 months the 2 principals sold all of their 13.4 million shares. That leads to a lot of questions. If he were the OSC he would be all over them. Recently they bought some shares back, and he hates to see when a company offers shares and the insiders immediately Sell. Doesn’t feel that is morally correct. (Not sure this info is correct. Bill.) He would be very, very wary of this company.

Patient Home Monitoring (PHM-X) or Concordia Health (CXR-T)? 2 different business models. This one is services where Concordia is pharmaceuticals and a much better company for investors, as it is bigger, has more revenue, more established and has been around much longer. This one has been a Gong Show of miscommunications and nothing has changed fundamentally. Had very good organic growth and made very good acquisitions. Have a new CEO. The fundamental story is completely intact. At its present valuation below $1, it is becoming much more interesting.

Michael Dalsin launched a fund where he is putting some of his shares with another portfolio manager, where they are going to go after other deals similar to this. It looks like they sold a significant amount of shares which scared a lot of investors. He ended up exchanging them for units in the fund. On any kind of growth name like this, you have to be careful. You have to let these things shake out and don’t panic, and believe in the fundamentals of the company.

A very aggressive consolidator of healthcare services in the US. Have done a great job of buying up a lot of small mom-and-pop operators and consolidated them. The whole idea is to achieve synergies by cross-selling services. The trick is to continue the pace of consolidation and they have been doing a good job up until this point. You cannot justify a name like this based on what they have done, but you have to assume they continue the pace of buying up things and consolidating. If that pace slows down for any reason, you’ll see volatility like there was today. Not for the faint of heart.

Has held at the $1.20 level. It has a 3 month base and the longer it keeps the base, the more positive it is. It is better for the upside. Sometimes these mid cap stocks don't lend themselves as much to technical analysis because they could have an announcement that could change the profile of the company very quickly. The $1.20 level seems to be where lots of investors are willing to put their time in.