Healthscope (HSO) – downgraded guidance see’s 20% drop
What Mattered Today
A choppy session for the ASX today with a strong open, weak morning between 11 and 12 before a reasonable recovery into the middle of the day. Banks were once again strong while some of the resources also chimed in. Healthscope (HSO) was the big mover, finishing down -18.77% to $2.38 after downgrading guidance.
The stock dropped more than 20% early which we viewed as an overreaction and added HSO to the Market Matters portfolio below $2.34. HSO have been able to grow earnings year on year for the last 5 however this year growth seems to be cooling. Obviously, this was a shock to the market hence the BIG share price reaction however if you’re looking for a quality healthcare provider – as we were – with legitimate medium-term earnings growth than the drop today in HSO should be viewed as an opportunity. We owned HSO previously, sold nearer to $3, and today bought back at sub $2.40. It’s another lesson where a stock trading on a big multiple that disappoints gets sold hard. HSO might snap back quickly – it might not, but the mid-term earnings growth of this stock is sound, particularly when we’re heading into November which is traditionally a very strong period for healthcare name (and a weak month for banks).
Healthscope (HSO) Daily Chart
We had a range today of +/- 36 points, a high of 5446, a low of 5410 and a close of 5430, off -11pts or -0.22%
A short afternoon note today – given a reasonably long lunch and very good steak at the Chophouse in Sydney – and maybe a bottle of red. A big week in our portfolio with the banks performing well as anticipated, while we got the opportunity today to increase our healthcare exposure at a level lower than we’d hoped. A full run down of the week and our thinking / positioning will be out in the weekend report on Sunday Morning. Have a great weekend!
As an aside, Market Matters are hosting a Webinar on Tuesday 25th covering our current thinking on the market. The webinar will be off the cuff, hopefully, insightful and will present our views on the market. For those that want to attend, it’s free and available by click here.
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