Market Clues to Healthcare Reality

Former long / short hedge fund analyst. Posting to stay sharp and share my views. All views are my own. Not financial advice.

[Market Clues to Healthcare Reality @Formerhfanalyst]

@long_equity MCK / COR / CAH - pharmaceutical distribution

[Market Clues to Healthcare Reality @Formerhfanalyst]

@KonstantCap They have $17.5b of HSA cash. From last 10Q (april 30th), I see $3.495b hedged at 3.91%, which leaves 80% unhedged. I don’t know if they’ve hedged more since April.

[Market Clues to Healthcare Reality @Formerhfanalyst]

(1/10) TLDR: $HQY is a pure play bet on health savings accounts (HSAs). It benefits from 2 clear trends, both of which are likely to continue: (1) Higher interest rates - this drives higher custodial revenues for HQY, which is their main revenue line, and (2) Outsized health insurance premium inflation - this pushes more and more people into high deductible plans that usually come with an HSA (where HQY is the leader).

[Market Clues to Healthcare Reality @Formerhfanalyst]

(10/10) 3rd is regulation. If you had genuine fears of a major shift in commercial membership to a "public option" or "Medicare for All" post 2028, obviously that's bad for HQY. But at this point, this seems unlikely given the political dynamics in Washington (not to mention the fiscal dynamics, as we're already spending too much on government-funded entitlements). Also, as a PSA, if you can, you definitely should max out your HSA, invest it in whatever equity index you can, and leave it. It is triple tax advantaged. Tax deductible going in, grows tax free, and when you use it for healthcare costs (hopefully when you're 80+ years old), you access it tax free. It's even more tax advantaged than a Roth IRA.

[Market Clues to Healthcare Reality @Formerhfanalyst]

(9/10) 2nd is cyber. They've had instances of elevated cyber / fraud costs, which have recently come back down. This is a wild card (frankly for most companies).

[Market Clues to Healthcare Reality @Formerhfanalyst]

2Q26 update: names I'd be watching the closest are $TNGX, $ORKA, and $SYRE.

[Market Clues to Healthcare Reality @Formerhfanalyst]

TLDR: 13F tracking of smart biotech hedge funds might make sense to create a low-cost index fund of attractive SMID-cap biotech stocks.

[Market Clues to Healthcare Reality @Formerhfanalyst]

@Borlaug_ @SouthernValue95 Presumably this trend would also be good for $wst and $stvn ?

[Market Clues to Healthcare Reality @Formerhfanalyst]

@nypost I wonder if, like the police, they have their pension payout tied to their total earnings, including overtime. So they effectively get some overtime earnings for their entire retirement. Another reason public sector pensions are fiscally unsustainable.

[Market Clues to Healthcare Reality @Formerhfanalyst]

@Borlaug_ Likely will see more exchange disenrollment in 2027 as well given prices going up mid-teens % again. Will further hurt payor mix for hospitals.

[Market Clues to Healthcare Reality @Formerhfanalyst]

@marketplunger1 Baker Bros, RTW, Perceptive, Deep Track, Paradigm BioCapital

[Market Clues to Healthcare Reality @Formerhfanalyst]

(9/9) 2027 will be a scary year for managed care, since by Fall 2027, the market will start thinking about the 2028 presidential election. Even the mid-terms in 2026 could be a problem for managed care if you see a large Democratic sweep of House+Senate, as the market will extrapolate that to the 2028 Presidential. Given the above, you need some margin of safety to buy managed care. OSCR at >25x P/E is definitely not that. I also think at this >$32 price, OSCR should consider issuing some equity. Overall, OSCR is a solid business, but I think sentiment has gotten overheated. I'm waiting for some sanity to re-emerge before buying.

[Market Clues to Healthcare Reality @Formerhfanalyst]

(1/9) TLDR: While $OSCR has enjoyed quite a rally this year, and 2Q results are likely positive based on their comments at a recent Goldman conference, I would not be buying $OSCR at >$32/sh. The stock's expensive, especially compared with peers, and fundamental structural problems with the exchange business model remain (margins can reset on you in a single year = lack of long-term margin stability). There's also risk of a negative surprise later in the yr, given the membership mix has shifted towards more Bronze plans, which have higher deductibles (early in the year, the patient is paying for all their costs, not OSCR, so OSCR's earnings look great. This could reverse as we get into 3Q/4Q as people spend down their deductibles).

[Market Clues to Healthcare Reality @Formerhfanalyst]

(8/9) I would be buying OSCR stock on a pullback. If you think EPS (including share comp) might be $1.25 in 2027, maybe it's worth 17-18x that number, or ~$21-23. I'd want at least a 30% return, so that means I'd consider buying on a pullback below ~$17.50/sh.