The Next Big Market Move
A Great Healthcare Stock
On October 17, 2000, I flew up front in an Airbus 300 on an American Airlines flight from London to Boston.
No, not in first class.
Way up front, with the pilots!
One of them is a close friend, and he'd invited me up there for the most interesting parts of the flight, the takeoff and the landing. So I buckled into the five-point harness in the center seat behind them, and enjoyed the experience.
This was pre 9/11, of course; less than a year later, the opportunity was gone.
But I enjoyed the experience immensely, impressed by the professionalism with which the pilots managed their realm, crammed with gauges, dials, levers and switches.
But what impressed me most about the experience was what I saw far in front of the plane as we flew, stretching away into the distance ... many other airplanes, all traveling the same path!
It was like they were following an invisible road.
And in a way they were. The air traffic control systems in place all over the world function because there are numerous prescribed routes, which allow air traffic "controllers" to, well, maintain control.
If pilots were allowed to take any route they wanted--and this involves not just direction but elevation and speed--the complexity would be overwhelming to the current system.
So the planes stick to prescribed routes, elevations and speeds.
But just as many urban roads are heavily trafficked--wasting uncounted commuting hours and gallons of gasoline per day--the roads in the sky are overloaded, too. And the decades-old technology used to manage air traffic is old as well.
The result: countless hours are lost and fuel is consumed than would be in an ideal world.
Happily, change is in process. In the U.S., as directed by the FAA, it's known as NextGen, which is really a group of technologies and practices that promise to make air travel more efficient than ever before.
The components of the system, in brief, are these.
Automatic Dependent Surveillance-Broadcast (ADS-B) is FAA's satellite-based successor to radar. ADS-B makes use of GPS technology to determine and share precise aircraft location information, and streams additional flight information to the cockpits of properly equipped aircraft.
NextGen Network Enabled Weather (NNEW) is part of an interagency effort to provide users of the National Airspace System with quick, easy and cost-effective access to timely, accurate weather information. Through the sharing of common weather data, NNEW will enhance safety and support collaborative decision-making.
System Wide Information Management (SWIM) is the network structure that will carry NextGen digital information. SWIM will enable cost-effective, real-time data exchange and sharing among users of the National Airspace System.
Collaborative Air Traffic Management Technologies (CATMT) is a NextGen Transformational Program that provides enhancements to the existing Traffic Flow Management System (TFMS).
National Airspace System Voice System (NVS) will supplant FAA's aging analog voice communication system with state-of-the-art digital technology. NVS will standardize the voice communication infrastructure among FAA facilities, and provide greater flexibility to the air traffic control system.
Atlantic Interoperability Initiative to Reduce Emissions (AIRE) is a cooperative agreement between the United States and the European Commission to promote and harmonize environmental initiatives and procedures in European and North American airspace.
DataComm Data Communications (which doesn't even get an acronym?) will enable controllers to send digital instructions and clearances to pilots.
Critically, you might note that motorists in their cars already enjoy a lot of these capabilities. My car talks to satellites, it's got a GPS navigation system and digital voice controls.
But air traffic control has been slow in adopting these technologies because everything has to work together; managing a seamless transition from one huge system to another is a daunting task.
Now the transition is underway, and similar systems will eventually blanket the planet, enabling far more efficient flying, allowing more aircraft to fly closer together on more direct routes, and "providing unprecedented benefits for the environment and the economy through reductions in carbon emissions, fuel consumption and noise."
Unfortunately, we'll still have to submit to the TSA.
As to the investing world, let me say this.
I'm tired of the word "choppy." I'm tired of reading about choppy markets, stocks that chopped up and down, and sectors that are chopping around.
Don't writers know any other words?
More importantly, don't you think that when there's such unanimity of opinion about the market, it's ripe for a change?
I think so, and I think the market's next major move will be up.
My reasons are these:
One, the market's been down a pretty long time, and the selling pressures, which peaked in August, have been easing. Institutions are clearly using the big dips to accumulate shares at reasonable prices. And the institutions love these dips. They know value, so it's to their benefit to extend the bottoming phase so they can continue to accumulate shares.
Two, individual investors feel terrible about investing here.
In fact, many tell me so, using words like these.
"I suspect that the market is going into a rat hole for a long time."
"I fail to see the logic of buying ... the European debt crisis ... is years from solution!"
As a result, they're inordinately focused on safety, which tells us that before long, the market will reward those brave souls who are courageous enough--and independent-thinking enough to take on risk.
Three, progress continues to be made in numerous industries, from energy to pharmaceutical to technology. And the best stocks in these industries offer brave investors a chance to make profits now!
One of the most interesting to me is a company named Health Management Systems (HMSY), a boring name but an accurate one, for a company that gets paid for (successfully) keeping health care costs under control.
Mike Cintolo, editor of Cabot Top Ten Trader, recently recommended the company. Here's what he said.
"The issue of cost containment in the U.S. medical industry is a pressing one, and companies like HMS Holdings are on the front lines in the battle. The company specializes in cost containment, revenue recovery, reimbursements and benefits coordination, contracting with state and national government agencies and insurance companies to manage third-party liability claims, reconcile state regulations with national Medicare and Medicaid requirements and keep a watch on potential fraud or mismanagement.
"The company's Q3 earnings report points toward a "national focus on improper payments" as a major source of future growth, and investors clearly agree. When HMS Holdings acquired Health Data Insights (HDI) in November, it strengthened the combined company's position as a recovery audit contractor in the quest for the integrity of claims in both Medicare and Medicaid. Revenue growth has been steady, with 26% growth in 2008, 24% in 2009 and 32% in 2010. As the company's Q3 earnings summary states, "Medicaid grows regardless of political environment," and the more efforts are made to reform the system, the better HMS Holding will thrive."
HMSY has been in a long-term uptrend for years, and in recent weeks, it's been building a base between 30 and 31. Mike suggested getting on board after any dip of one point, and that still seems like good advice to me.
But if you want the best advice, with regular follow-ups on this stock (and many more), I suggest you take a no-risk trial subscription to Cabot Top Ten Trader.
Yours in pursuit of wisdom and wealth,
Cabot Wealth Advisory