On Friday I made two transactions: I sold my remaining 550 shares of AHS (at $4.25) and reduced my MAS 2013 LEAPS by 25 contracts (sold at $0.80 per contract).
If you click on the "zz AMN Healthcare Services" label on the right you'll see AHS has been a lot of work, a lot of ups and downs, and very little profit. But I guess sometimes that's just how it goes, right? Anyway, although I still think the shares are undervalued, they were such a small % of my portfolio that it just wasn't worth holding them anymore.
The MAS LEAPS, on the other hand, have turned out really well over a relatively short amount of time. I bought 125 contracts at $0.45 about 2 months ago, so selling 25 of them at $0.80 is great! Unlike AHS, with MAS I'm just trying to be opportunistic and take advantage of the price Mr. Market is offering, so don't be surprised if I continue selling in the days/weeks to come.
The other reason for selling both AHS and MAS was to make my portfolio a little less risky. The market has rallied nicely since the start of Q4, and as a result the % of my portfolio in cash had fallen to the high 20's. However, after Friday's transactions my cash % is back in the low 30's, and if the market continues to rally I'll probably continue to trim back some positions.
Questions? Comments? Email mevsemt@gmail.com
Showing posts with label zz AMN Healthcare Services. Show all posts
Showing posts with label zz AMN Healthcare Services. Show all posts
Saturday, October 22, 2011
Thursday, June 2, 2011
A Triumph of Stubbornness?
I don't know about you, but when I make a good decision I like to THINK it's due to above average intelligence or some unique insight that only I was capable of making. Of course, once I stop fooling myself I usually realize my good decision came about due to something else entirely - usually luck but in this case stubbornness.
Here's the background - in May of 2010 I purchased 1200 shares of AMN Healthcare at $8 (http://mevsemt.blogspot.com/2010/05/transaction-alert-bought-ahs.html). Shortly thereafter the stock absolutely plunged, droping as low as $4.14. Now here's where the stubbornness comes in - rather than hold or sell I dug in my heels and bought more at $4.68 (http://mevsemt.blogspot.com/2010/09/backing-up-truck.html).
Today the stock's hovering around its 52-week high so I decided to sell the original 1200 shares (long term capital gain) for $8.54. I would've sold my whole position but I figured this would be a bad strategy from a tax perspective (since most of my gains have come from the shares I bought at $4.68 and I've held these shares less than a year).
Questions? Comments? Email mevsemt@gmail.com
Here's the background - in May of 2010 I purchased 1200 shares of AMN Healthcare at $8 (http://mevsemt.blogspot.com/2010/05/transaction-alert-bought-ahs.html). Shortly thereafter the stock absolutely plunged, droping as low as $4.14. Now here's where the stubbornness comes in - rather than hold or sell I dug in my heels and bought more at $4.68 (http://mevsemt.blogspot.com/2010/09/backing-up-truck.html).
Today the stock's hovering around its 52-week high so I decided to sell the original 1200 shares (long term capital gain) for $8.54. I would've sold my whole position but I figured this would be a bad strategy from a tax perspective (since most of my gains have come from the shares I bought at $4.68 and I've held these shares less than a year).
Questions? Comments? Email mevsemt@gmail.com
Thursday, September 9, 2010
Backing up the truck...
Given the precipitous decline in the stock price of AHS I thought now would be a good time for a second look. To recap, AHS reported decent results last quarter, BUT they also announced an acquisition which they’re completely funding with stock (thereby massively diluting existing shareholders). They’re also assuming 136 MM in additional debt in conjunction with the acquisition. IMHO it’s the dilution and debt burden that has caused the sell off, which may in turn be an opportunity to buy more shares.
So now that AHS has new operations, new cash flows, and a new capital structure, (and a new stock price!) let’s do a quick and dirty valuation analysis. Assuming a stock price of $5, the company has an EV of about 400MM and a market cap of 206MM. IF we also take management at their word and model 30MM in additional EBITDA from the acquisition, then we’ve got pro forma EBITDA of 71MM on revenue of 904MM – this means AHS is trading at an EV/EBITDA of 5.6x.
Now let’s run through a hypothetical (but very reasonable) 5-year scenario. First, we’ll assume that EBITDA will grow steadily to 90MM by the fifth year (btw this is a pretty conservative assumption given that EBITDA before the acquisition in 2008 was 95MM). Second, we’ll assume all EBITDA during our 5 year analysis goes toward paying down debt, paying interest, rebuilding working capital, and capex. Because AHS has low ongoing capital requirements, it’s not unreasonable to assume they can pay off all their debt within our 5 year window.
So, in our hypothetical situation, at year 5 AHS as a pretty simple company – it’s essentially cash free / debt free, it has EBITDA of 90MM (which we can assume is growing at a low single digit % going forward), and the majority of EBITDA converts to FCF. The question is, how much would you pay for this asset?
The answer, of course, is “it depends,” but I think it’s reasonable to assume the company could trade somewhere between 4x (very conservative) and 8x EV/EBITDA, giving us a market cap somewhere between 360MM and 720MM (or a stock price between $8.75 and $17.50). Now obviously I have no idea if this is how things will play out, but it feels like a high risk/high reward situation. Remember, AHS does have a lot of leverage and if the economy falls off a cliff AHS could be in real trouble. However, I think this is a risk worth taking, so I purchased an additional 550 shares (giving me a total of 1750) today at a price of $4.68.
So now that AHS has new operations, new cash flows, and a new capital structure, (and a new stock price!) let’s do a quick and dirty valuation analysis. Assuming a stock price of $5, the company has an EV of about 400MM and a market cap of 206MM. IF we also take management at their word and model 30MM in additional EBITDA from the acquisition, then we’ve got pro forma EBITDA of 71MM on revenue of 904MM – this means AHS is trading at an EV/EBITDA of 5.6x.
Now let’s run through a hypothetical (but very reasonable) 5-year scenario. First, we’ll assume that EBITDA will grow steadily to 90MM by the fifth year (btw this is a pretty conservative assumption given that EBITDA before the acquisition in 2008 was 95MM). Second, we’ll assume all EBITDA during our 5 year analysis goes toward paying down debt, paying interest, rebuilding working capital, and capex. Because AHS has low ongoing capital requirements, it’s not unreasonable to assume they can pay off all their debt within our 5 year window.
So, in our hypothetical situation, at year 5 AHS as a pretty simple company – it’s essentially cash free / debt free, it has EBITDA of 90MM (which we can assume is growing at a low single digit % going forward), and the majority of EBITDA converts to FCF. The question is, how much would you pay for this asset?
The answer, of course, is “it depends,” but I think it’s reasonable to assume the company could trade somewhere between 4x (very conservative) and 8x EV/EBITDA, giving us a market cap somewhere between 360MM and 720MM (or a stock price between $8.75 and $17.50). Now obviously I have no idea if this is how things will play out, but it feels like a high risk/high reward situation. Remember, AHS does have a lot of leverage and if the economy falls off a cliff AHS could be in real trouble. However, I think this is a risk worth taking, so I purchased an additional 550 shares (giving me a total of 1750) today at a price of $4.68.
Wednesday, August 25, 2010
Current Holdings and Random Musings
Well so far it's been a very tough Q3, both in absolute and relative terms. After marginally outperforming the S&P through Q2 things have taken a turn for the worse, and YTD I'm underperforming the S&P by a wide margin. However, with a highly concentrated portfolio, big swings in performance are bound to happen, and hopefully recent history isn't indicative of things to come.
For my current holdings, AHS in particular has been a thorn in my side. The company recently reported results, which weren't bad by any means. HOWEVER, the company also announced an acquisition which will be completely paid for with newly issued stock, thereby materially diluting existing shareholders. My estimate is this will destroy about $2 to $4 in value for existing shareholders. Of course, the stock has gone from $8'ish to $4'ish, which I think is an example of a typical "Mr. Market" over reatcion. All things considered, I think this stock is worth $10 to $15 per share (assuming management doesn't make a habit of diluting shareholders).
GMXR has also been a big thorn in my side. Natural gas stocks in general have been hammered, and GMXR in particular has been killed because of its high level of debt. I think the risk/reward proposition at today's price is pretty compelling, and I'm considering doing one of two things; 1) doubling down 2) trading GMXR for a similarly punished E&P company. The logic behind #2 is that my account is taxable, and with significant gains from SHLD, USG, WTM, and DFS, I'm sitting on roughly 28K of capital gains for 2010 (ouch!).
Generally I try to stay away from making broad market predictions, I figure I'm better served by trolling for pockets of opportunity. HOWEVER, I do read the predictions and observations of other smart investors, and I try to incorporate any inferences/insight when I make high-level portfolio allocation decisions. IMHO the two best sources for this are John Hussman's weekly comments (www.hussmanfunds.com) and pretty much anything published on PIMCO's website (although I'm partial to Bill Gross's monthly commentary). Again, this is just my opinion, but if you read everything they've published over the last six months (which will probably take a day or so) you'll automatically become a better investor.
Anyhow, right now I've got about 40K (or 43%) of my portfolio in cash (obviously this is a huge %), so clearly I'm worried about downside risk. This is in the realm of gut feel, but personally I'd be much more surprised if the DOW goes to 12K than if it goes to 8K. And assuming it does go to 8K it'll be nice to have some cash on the sidelines waiting to be deployed.
For my current holdings, AHS in particular has been a thorn in my side. The company recently reported results, which weren't bad by any means. HOWEVER, the company also announced an acquisition which will be completely paid for with newly issued stock, thereby materially diluting existing shareholders. My estimate is this will destroy about $2 to $4 in value for existing shareholders. Of course, the stock has gone from $8'ish to $4'ish, which I think is an example of a typical "Mr. Market" over reatcion. All things considered, I think this stock is worth $10 to $15 per share (assuming management doesn't make a habit of diluting shareholders).
GMXR has also been a big thorn in my side. Natural gas stocks in general have been hammered, and GMXR in particular has been killed because of its high level of debt. I think the risk/reward proposition at today's price is pretty compelling, and I'm considering doing one of two things; 1) doubling down 2) trading GMXR for a similarly punished E&P company. The logic behind #2 is that my account is taxable, and with significant gains from SHLD, USG, WTM, and DFS, I'm sitting on roughly 28K of capital gains for 2010 (ouch!).
Generally I try to stay away from making broad market predictions, I figure I'm better served by trolling for pockets of opportunity. HOWEVER, I do read the predictions and observations of other smart investors, and I try to incorporate any inferences/insight when I make high-level portfolio allocation decisions. IMHO the two best sources for this are John Hussman's weekly comments (www.hussmanfunds.com) and pretty much anything published on PIMCO's website (although I'm partial to Bill Gross's monthly commentary). Again, this is just my opinion, but if you read everything they've published over the last six months (which will probably take a day or so) you'll automatically become a better investor.
Anyhow, right now I've got about 40K (or 43%) of my portfolio in cash (obviously this is a huge %), so clearly I'm worried about downside risk. This is in the realm of gut feel, but personally I'd be much more surprised if the DOW goes to 12K than if it goes to 8K. And assuming it does go to 8K it'll be nice to have some cash on the sidelines waiting to be deployed.
Monday, May 24, 2010
Transaction Alert: Bought AHS
When I sold SandRidge Energy (SD) last Friday I used the proceeds to immediately buy AMN Healthcare Services (AHS). I purchased 1200 shares, for a total outlay of about $9,600. The stock is currently at $8 a share, but I think it's worth about $15 to $20.
AHS is a staffing company for nurses and other healthcare workers. They are somewhat economically sensitive, and as a result their revenue fell from $1.2B in 2008 to $760MM in 2009. However, AHS generally produces pretty stable EBITDA margins in the high single digits, for 2008 their margin was 7.9% and for 2009 it was 7.5%.
I expect their revenue to rebound to about $1B within a year or two and probably grow at 5% to 10% thereafter. At $1B in revenue I conservatively expect them to generate about $70MM of EBITDA. With this type of margin/growth profile I think a EV/EBITDA ratio of 10x is quite reasonable, which implies an EV (enterprise value) of $700MM. Their current EV is just over $300MM, so it's really not much of a leap to get to my fair value range of $15 to $20 a share.
From a high-level perspective this new purchase did not alter my portfolio very significantly. I made the AHS purchase with cash from the sale of SD, so I'm still about 30% cash.
AHS is a staffing company for nurses and other healthcare workers. They are somewhat economically sensitive, and as a result their revenue fell from $1.2B in 2008 to $760MM in 2009. However, AHS generally produces pretty stable EBITDA margins in the high single digits, for 2008 their margin was 7.9% and for 2009 it was 7.5%.
I expect their revenue to rebound to about $1B within a year or two and probably grow at 5% to 10% thereafter. At $1B in revenue I conservatively expect them to generate about $70MM of EBITDA. With this type of margin/growth profile I think a EV/EBITDA ratio of 10x is quite reasonable, which implies an EV (enterprise value) of $700MM. Their current EV is just over $300MM, so it's really not much of a leap to get to my fair value range of $15 to $20 a share.
From a high-level perspective this new purchase did not alter my portfolio very significantly. I made the AHS purchase with cash from the sale of SD, so I'm still about 30% cash.
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