Friday, January 9, 2009

Bookkeeping: Starting Quality Systems (QSII)

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All the Obama stocks are bouncing hard here - infrastructure, medical IT, solar. As I said: Best. President. Ever.

I mentioned Quality Systems (QSII) as a name I was interested in this weekend, on a pullback [Potential Portfolio Candidates] - it was in the mid $40s.

On Tuesday, an analyst tried to speak sense and throw water on the Obama hype [Jan 6: Analyst Throws Water on "Hope" in Medical IT] I wrote then

This is really just like the solar and infrastructure areas - buy because Obama promises to shovel money down the throat of a sector or "likes" the sector. Even if very little money will show up anytime soon - that doesn't matter to HAL9000 and crowd. They buy thesis, not reality.

An analyst tried to warn about this in infrastructure a few weeks ago [
Dec 19: Citi Analyst Frowns on Obamamania; ABB Gives Reality Check] - the stocks fell for a day or two before hope returned.

So we have a quandry very similar to solar or infrastructure - buy on reality? or buy on Obama hope and hedge fund thesis? I've been targeting
Quality Systems which is up about 80% since early December on 'thesis', and waiting for it to pullback to a major support area - it is doing a textbook move today to the 50 day moving average (upper $38s).

Tough call this one... I am going to watch it closely here and I'd like to see a bounce before getting in, even if I have to pay up a bit... it is now in the low $39s; it could bounce here or fall further to the 200 day moving average near $36, or simply fall more on "reality". But IF this follows the infrastructure call from mid December, after today's reality check the lemmings will run right back into the name ... on hope.


And so as I wrote in that last sentence, after exiting for a few days, the lemmings return - just like in infrastructure when an analyst tried to say "my gosh folks, this money is going to take maybe a year to roll in and its only going to be a fraction of what the hype is about". The market's answer to facts? "Obama! Obama!"

QSII is not the only one - the entire space is ramping up on Obamamania.... it's truly amazing that nothing matters in the market aside from "thesis" (global growth is back!) (housing will recover soon!) OR Obama. Or the knock out punch - any thesis based on both Obama AND thesis.... can't lose there.


ATHN is very expensive, but I have to look closer at MDRX which reported yesterday and is up 10% (Ooooobbbaaaaama)...
  • Shares of Allscripts-Misys Healthcare Solutions Inc. rose Friday, as Wall Street appeared pleased with the first quarter for the clinical software provider following the tie-up of Allscripts and Misys.
  • The Chicago-based company reported a larger-than-expected profit in the period ended Nov. 30, which included its first seven weeks as a combined company. Analysts said contract bookings were strong, and they think growing adoption of electronic medical records -- part of President-elect Barack Obama's agenda -- will aid the company.
  • Stifel Nicolaus analyst Todd Weller said Allscripts-Misys' business was stable and not badly disrupted by the merger, and there was little fallout from the recession. In his view, the company is making progress in cutting costs and combining the operations of the two companies.
  • He said the government-backed demand will boost the stock even if contract bookings are uneven in the near future. "We are increasingly convinced public policy is likely to play a significant role in 2009 in driving further acceleration in private sector adoption of electronic medical records," he wrote.
Can you feel the love? MDRX is actually quite reasonable at 15x Obama earnings err.... I mean 2010 estimated earnings.

I am most familiar with Quality Systems from this group so that's why I chose it - but when Obama has your back, just throw a dart into the sector (like you can do in infrastructure) and let the thesis overwash you.

More importantly, as I wrote Tuesday - I would wait and see how the stock reacted - as you can see, QSII fell to support and today is bouncing. Today we have the same price as Tuesday but we have what appears to be a successful bounce off of support - whereas it was iffy on Tuesday wondering where the stock would bottom at. So we have a low risk entry point and an easy escape route - I am surprised it did not fall to the 200 day moving average of $36, but the halo of Obama is very strong. We're starting with a 1.4% stake in the $39.60s - I will add on a drop to $36 or so (limit order waiting) but cut back sharply below $35. So we're entering 10%+ below last week's price, but definitely have the potential for more downside if the market stops bouncing up and refusing to believe every ounce of bad news :)


So we've got infrastructure covered (but probably need another name), we've got solar covered, and now we've got medical IT covered - I think the 3 main Obama hype sectors are now covered.

Outside of Obama we have the "housing recovery" thesis taken care of, and we have a little bit of the "global growth is back!" thesis covered with 2 commodity names but I need one of these dry bulk shippers which go up 25% a day now.

So I think we have everything covered now in terms of "thesis land" - ah yes I need to buy a retailer on the "American consumers are back!" thesis - err, not so much.

Quality Systems, Inc. engages in the development and marketing of healthcare information systems in the United States. Its system automates various aspects of medical and dental practices, and networks of practices, such as physician hospital organizations and management service organizations, ambulatory care centers, community health centers, and medical and dental schools. The company offers proprietary electronic medical records software and practice management systems under the NextGen3 product name.

Long Quality Systems in fund; no personal position

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