BLVD Centers Corp (CXV-X)

Addiction treatment centres, mostly in California. Their plan was to roll these out all over the US and have different phases of treatment. The company wasn't that profitable, as employees in each of the individual centres was not really buying what management was doing and not taking ownership. The company changed their compensation to actually compensate managers of the individual centres. There still hasn't been tremendous results from that.

It has been a bit of a disappointment in the how they have executed. They are in the rehabilitation business, acquiring centers. They were driving everything out of the head office and each center was not that profitable. Now each manager is incentivized with how profitable they are. We have to see how this works. He has it on his radar screen.

This has been disappointing. They’ve changed their compensation program for managers, where they used to operate everything out of head office with no individual profit centres for their individual locations. Now, the individual manager is responsible for their profit and loss. He is hoping to see an uptick in profitability when this starts to come through, probably another quarter or two. Long-term this should be a very strong business, because they deal with addiction treatment in a number of different forms.

They are changing the way they compensate each of the ground managers. Have built out 5 pods so far, which offered in-patient services as well as day services. They were making all the decisions from a top down perspective, and the individual centres were not as profitable as they should have been. They recently adjusted the compensation structure, so now the managers are compensated on the profitability of each of their individual pods. This next quarter will not be indicative of that change, it will be one quarter after that. It has a lot of potential, but they haven’t lived up to that yet.

(A Top Pick Dec 9/15. Down 59.32%.) In the rehab treatment business in the US, and it has been a huge disappointment. They continue to execute. Valuation was ahead of what he should have paid for it. Also, it has taken a little longer for them to roll out what they were trying to accomplish. He got stopped out.

(Market Call Minute.) If he owned this, he would probably wait to see how their quarter continues to improve.

(A Top Pick Aug 12/15. Down 133%.) This got caught up in the healthcare meltdown, but there are also some company specific problems. Revenues are okay, but they are not profitable. Thinks they need to bring in management that actually knows the industry better. He would watch for 2 more quarters, and if they don’t show improvement in the bottom line, he would consider exiting.

They continue to execute fairly well. They have 5 of these pods and are guiding for $80 million of run rate by the end of the year. They have to get up to speed for you to see this level. They have started up a lab for all the samples they take from patients. They are bringing this in-house and it will be a big savings for them from an expense point of view. They are fairly valued, but if you look at the run rate by year end then they look good.

Doesn’t follow this too closely. A rollup for rehab facilities. He doesn’t buy into the rehab market rollup story. There are better quality companies out there.

(A Top Pick May 20/15. Down 54.76%.) A high flyer about a year ago, and probably got ahead of itself. However, they are doing all the right things. He was very close to making this a Top Pick because they continue to execute really well. They’ve opened 4 new clinics in the last 45 days, and have also opened their lab. They are hoping to have a run rate of about 80 million by the end of this year. He still really likes this.

He likes this. This is in the drug rehab space in the US. Since the government has mandated funding for these for insurance companies, there is a lot of tailwind for it. The stock has been volatile and controversial at times but the numbers, if they come in halfway right, should move the stock. High risk story, but lots of cash on the balance sheet.

(A Top Pick April 8/15. Down 57.94%.) Continuing to do everything right and have really good growth. Small caps haven’t been in favour in this market. The “abuse” treatment business is about a $35 billion business in the US, and there is no one competitor that has more than $200 million, so there is huge opportunity for them to capitalize on. Have 4 pods open now, and will have 5 more by the end of this year. Thinks the run rate revenue by the end of this year could be around $100 million.

Has been buying a lot of this. They have $0.10 a share in cash and $30 million in revenue. Doing 30% operating profits right now. To him, the business is doing very well. The problem is the stock price. There was some controversy with management, but he saw that the 2 founders had bought 1.5 million shares last week. If you do what they do, you will probably do okay. The new CEO is going to start marketing the story, so it should find a new audience and start to bounce back.

Rolling up rehab facilities. There is probably growth potential here, but not a company he would buy into. Doesn’t see a huge need to consolidate the rehab facility industry. There was a recent news release about an acquisition called Hollywood Rehab where there was misrepresentation in the purchase, but in the same news release the founders also decided to step down and hand over responsibility to the operation managers. Markets knew this would happen eventually.

This is a story about rehabilitation of people who have substance abuse in the US. Originally they were looking at this as an acquisition story, but have changed that and are now doing it organically, and have been growing phenomenally well. As this broke down and hit some technical levels, he trimmed back his position. Recently has been looking to pick up more of this.