Patient Home Monitoring (PHM.V)

He is still very keen on this. The recent changes have been positive. Did a big acquisition and brought the management from that acquisition to manage this company. They have done 8 acquisitions and will continue to do more. They still have $70 million in cash plus shares. Thinks it will be listed on NASDAQ within a year. A very good space to be in.

A rollup story that he had owned at one point. Since April momentum has waned, so he sold his holdings. It scores in the middle of the pack on momentum and valuation. A high volatility stock which he prefers not to be in. Stocks like this can fall a long way before a valuation floor sets in. There are negative ROE’s at 56X EBITDA and no price earnings. This market is trending down and this is not one he would be considering.

(A Top Pick July 30/14. Up 348.48%.) Have announced some monster deals such as Southeast in Louisiana. The growth rate has really ramped up, but with the market being choppy in the last few weeks, it hasn’t done too much. They continue to move their earnings up and guide their numbers up. A year ago they were talking $50-$75 million in revenue, with 25%-30% of that being EBITDA. Now they are saying they are going to exit this year at $200 million without any organic growth or any more acquisitions, and the same kind of earnings multiple to their EBITDA.

Health care biomedical stocks have been on an incredible tear for the last 2 years. In the last 2-3 months, they have all slowed down and are going sideways, and people are waiting to see what happens next. In this case, they have done a large number of acquisitions, and a lot are waiting for the next quarter to see where things go. He is comfortable holding this. You need to see another quarter as Q2 results are just around the corner. His expectation is that this should be 30%-40% higher in a year’s time. (See Top Picks.)

Has very short term accumulation of companies that are immediately accretive to assets. He is making very good money on this and doesn’t expect to do otherwise.

A rollup strategy in the healthcare sector. They have done really well. Hasn’t followed it for the last couple of years. Likes the story, but one of his Top Picks has a better valuation. (See Top Picks.)

Acquisition of Sleep Management has almost doubled their size. Have a lot of Letters of Intent. Big pipeline. The bigger they get the more deals they see. These guys are all bankers and are looking at these deals constantly. Also, know how to promote stock and their thesis. Likes what they are doing overall, but if you look at it on a valuation metric, they are riding on a whole lot of waves. Their rollup strategy is working right now. Also, riding on the wave of healthcare, an extremely hot sector right now. He would be very careful when looking at this name.

Did a $100 million acquisition last week. They have operations in 19 states. Because of PHM-X’s high PE and the low PE of the acquisition, the value of the Acquisition immediately doubled in value.

He finds the valuation a little mind numbing. PE of 18 times. It is one of the few roll up strategies where they also have organic growth. The valuation is extremely high and could be susceptible to correction. It would appeal to him around $1.

Had a parabolic upward move from late 2014 to early this year. Currently you are getting a pullback after a parabolic move. That is not necessarily a bad thing. It looks like it is trying to find a base. The last low that it hit in March seems to be holding. To him it looks perfectly normal for a stock that has moved that quickly.

A good Short? Not a good idea. Just raised money at $1.50, so they have plenty of cash. It’s a stock market darling. Doesn’t have any debt to speak of and you typically don’t Short unless there is debt. Thinks they have some backfilling to do. They have to take their cash and start putting it to work, and generating cash flow with it. Has a good outlook for the next couple of years.

Still up 70% on the year. Earnings are quite solid and fundamentals are quite good. They raised a lot of money and only made one small acquisition. There is a lot of profit taking going on. He still likes the prospects.

Raised quite a bit of capital and have been highly acquisitive. Have also been pretty successful in driving organic sales growth by cross-selling their products. Effectively they buy home medical products that have big patient lists, which they can then go and cross sell to the other products. They just keep acquiring and doing this. Trading at something like 3 to 4 times forward-looking EBITDA. There are good things happening with this company.

It is a clinic roll-up strategy. They use valuation of their equity to purchase these at a lower price and then get a lift. He would argue that it is getting into a bit of a bubble territory. Valuation is not there for him. Price momentum is off the charts and can carry it forward. You want to be very cognizant of when to get out.

Expected to earn $.08 for September/16, giving a 20 PE multiple, which is probably reasonable based on their growth. They are expected to continue to grow by acquisition. Thinks there is a reasonable opportunity for the stock.