Metrics in the Home Health, Hospice, and Personal Care Industry

Amedisys (NASDAQ: AMED) is one of the companies serving in the home health, hospice, and personal care industry. Here are some of the metrics in the industry:

Length of Stay (LoS)

Length of stay (LOS) is an important measure for hospice care because it represents
the time available to provide appropriate and needed services near the end-of-life.

Average Daily Census (ADC)

ADC or Average Daily Census = Total patient days in a period/number of period days.

(Source: Amedisys)

Exited my position in Redfin and Energy Recovery

I had written about Energy Recovery Inc., (NASDAQ: ERII) on my blog on July 25, 2020. I had taken a small position in Energy Recovery on July 24, 2020 at $7.70. Since then the stock has had a nice run and I sold my position today at $8.50 for a 10.3% gain. The technical indicators are still flashing a buy for Energy Recovery. But the stock has had a sharp run-up. The MACD also had a bearish crossover and that was partly the reason for my sell. The Relative Strength Index was at 63 today and I did not wish for it be in the over bought territory before I sold this position. 

Exhibit: Energy Recovery Technical Indicators on August 11, 2020.

 (Source: Tradingview)

I took a position in Redfin on August 10, 2020 at a price of $41.80. I never had full conviction for this trade. I felt Redfin (NASDAQ: RDFN) was too overvalued and there were too many uncertainties in the economy and in the housing market. Given the loss of unemployment benefits for millions of Americans, I wasn't sure how this was going to impact the demand for housing. The Federal Reserve has done an admirable job of lowering the interest rates and stabilizing the financial markets. But even they cannot create jobs or pay unemployment benefits or prevent evictions. So, I felt that the economy is in a very precarious position.  In this current situation, I did not want own a company like Redfin. It may be a speculative bet at these valuations and economic conditions. I sold Redfin at $43.50 for total gain of 4%.   

 

     

     

Is Redfin a buy at $41.80?

Redfin (NASDAQ: RDFN)  - the real estate brokerage company - had a great Q2 2020. Revenue increased by 8% y-o-y to $214 million. The company did book a $4 million operating loss but that was down from $12 million in the same quarter in 2019. The ultra low mortgage rates are benefiting the company. But given the pace of home sales there's very low levels of available homes for sale.The company has provided good guidance for the third quarter. 

Exhibit: Redfin had a down day today, but the stock may not have hit bottom

 

(Source: Tradingview)

There could be support for the stock at around the $41 level.  If the stock drops below the support level at $39, that may be a very bearish sign for the short-term. On the upside there could be resistance for the stock at $43.65. My limit order got triggered today at $41.80 and it ended the day at $41.70. If it passes $43.65 it could go to new all-time highs. Majority of the Wall Street analysts are neutral on the stock with a target of $39.50.

(Disclosure: I own Redfin)   

     

Barron's says buy Vodafone, are they correct?

On August 6, 2020, Barron's magazine published an article on Vodafone (NASDAQ:VOD) stating that the shares have bottomed based on the following reasons:

• The company has put together €1 billion cost cutting plan.
• Potential upside from introduction of 5G.
• Assets that they have marked for disposal could generate cash and dispose of under performing assets.
  
• The demand for data is exploding due to the lock down caused by the COVID-19 pandemic.

The company saw lower churn rates partly because of the pandemic driven lock downs. The company is also reaffirming its guidance and estimates that it will generate €5 billion in free cash flow. Germany is Vodafone's largest and most important market. It accounts for 34% of the company's EBITDA. Given that Germany has the virus under control, that market has been resilient through this global crisis. 

Exhibit: Vodafone's Most Important Market is Germany

(Source: SeekingAlpha)

Looking at the charts, the shares have been range bound ever since it peaked at around $18.18 on June 8, 2020. Barron's may have a point. The stock may have indeed bottomed. The Bollinger Bands are tightening, which may indicate a sharp price move, but we do not know in which direction. If Barron's is right, that sharp move may be an uptrend. Ideally, I would be a buyer when the price is hugging or closer to the lower band. Currently the price is in the middle of the band. The Moving Average Convergence Divergence (MACD) is flashing a slight buy signal. 

 

Exhibit: MACD flashing a moderate buy signal

 (Source: Tradingview)

I have placed a new buy limit order for Vodafone on $15.31. There's very less probability that I will get it at that price, but if I do I will report back on its performance when I sell.    

(Disclosure: I own VOD)         

Big Tech is Taking a Break From the Rally

    Both Apple (AAPL) and Microsoft (MSFT) are trading below its 10-day moving average. Apple is down from its 52-week high of $399.82 and currently trades at $380.16. That's a drop from the 52-week high of - 4.97%. Apple's 10-day moving average is 382.436 (Tuesday, July 28, 2020). Microsoft is down from $216.38 to $204.06 that's a -5.6% change. Its 10-day moving average is $202.15. Amazon (AMZN), Facebook (FB), and Alphabet (GOOG) are all trading below their 10-day moving average. Out of this cohort only Facebook is trading below its 50-day moving average. 

Exhibit: Big Tech's Downturn has Started. When will it end? 

(Source: SECURFII)

    Microsoft has gained 53% from its lows in March 2020. Apple has gained 76% form its March 2020 lows.  The gains have been spectacular. Google has gained 50% from its March lows. Amazon has gained nearly 82% from its March 2020 lows.     

    It seems like all these stocks are starting a downward trend after the huge run-up they have had over the last few years and the rebound they have had since the pandemic induced crash of March 2020.           

Climate Change Mitigation Technologies Will be Winners in the Future

    For all the efforts that are underway across the globe to keep the earth's temperature from rising, one thing is becoming clearer with each passing day - climate change mitigation technologies and projects will have to be employed at a large scale to tackle its effects. Companies in the climate mitigation space should be on the radar for investors. 

    I have come to this conclusion after reading various articles on the topic of climate change over a number of years. A couple of recent articles in the New York Times only got be thinking more seriously about the kind of climate change mitigation technologies that will be winners in the future. One article discusses the crisis that could be brought on by the mass migration of people due to excessive heat caused by climate change. When excessive heat causes drought, destroys crops, and makes living conditions very hard, people may have no choice than to start migrating towards cities and seek refuge there.

    Various technologies may have to be employed to prevent farmers from dying of hunger and excessive heat. Providing people with air conditioned spaces could be one of the mitigation project that could be more broadly applied. Air conditioner makers such as Carrier (NYSE: CARR) may be a big beneficiaries of this trend. Use of air conditioners increases the global warming and those effects need to be mitigated too.

    To mitigate the effects of drought, more desalination plants will have to be built to supply growing cities with water.  These plants can also be used to supply water for irrigation. Israel is a leader in the use of desalination technology and it's just a matter of time before many other parts of the world - like India, Africa, the United States, and South America - need massive desalination capabilities. These plants are primarily based on seawater reverse osmosis (SWRO) technology. The reverse osmosis plants consume a lot of energy. To reduce energy use, these plants employ energy recovery devices such as the one manufactured by Energy Recovery Inc (NASDAQ: ERII).

Exhibit: A Energy Recovery Device Built by Energy Recovery Inc.

(Source: Energy Recovery Inc.)

   

    Other technologies and projects that will gain wide spread use in the future are vertical or indoor farming and drip irrigation systems. A lot of venture capital investment is going into vertical farming companies. Softbank has invested in an indoor farming start-up called Plenty. While investors focus on high-tech startups like Plenty, they should not lose focus of "old school" technology such as water pumps, drip irrigation systems and water meters that could also see increasing demand in the years to come. Water conservation technologies beyond drip irrigation will gain ground. For example, low-flush toilets could gain wide-spread use in households. Sophisticated leak detection systems could be employed at a much wider scale to prevent water loss in the water distribution networks and at home. 

    As the world tackles climate change, investors should keep a close eye on mitigation technologies that could improve lives.  

(Disclosure: I own shares in Energy Recovery Inc.)