Latest / Bloomberg Intelligence / Home Health Care Referrals Are Surging: BrightStar Care CEO

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Home Health Care Referrals Are Surging: BrightStar Care CEO · Bloomberg Intelligence

• 0:02
  Speaker 1: Welcome to the Bloomberg Penl Podcast. I'm Paul swing you
• 0:05
  Speaker 1: along with my co host Lisa Brahma Waits. Each day
• 0:07
  Speaker 1: we bring you the most noteworthy and useful interviews for
• 0:10
  Speaker 1: you and your money. Whether at the grocery store or
• 0:12
  Speaker 1: the trading floor, find a Bloomberg Penl podcast on Apple
• 0:15
  Speaker 1: podcast or wherever you listen to podcasts, as well as
• 0:18
  Speaker 1: at Bloomberg dot com. Right now, we want to shift
• 0:21
  Speaker 1: the conversation, Paul, to what is going on in what
• 0:25
  Speaker 1: has become the epicenter in some places of the crisis,
• 0:28
  Speaker 1: which is nursing homes and health care centers for immuno
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  Speaker 1: compromised individuals. And there's no one better for us to
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  Speaker 1: speak to than Shelley's son, chief executive officer and founder
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  Speaker 1: of bright Star Care, which is a national private duty
• 0:41
  Speaker 1: home care and medical staffing franchise. So with a national
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  Speaker 1: look at some of those more vulnerable individuals, Shelley, can
• 0:48
  Speaker 1: you give us a sense of how big of an
• 0:51
  Speaker 1: issue the coronavirus and its spread has been for you
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  Speaker 1: and your staff. Thank you so much. I think for us,
• 0:57
  Speaker 1: we we came into the crisis with all of our
• 1:00
  Speaker 1: locations joint Commission accredited, so you know, hand hygiene and
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  Speaker 1: safety protocols were um paramount to our day to day activities. UM.
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  Speaker 1: So we have had relatively minimal, you know, less than
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  Speaker 1: five percent impact of our caregiving staff and our clients.
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  Speaker 1: But it's certainly something with the vulnerable population, the most
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  Speaker 1: at risk population that we take care of every day,
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  Speaker 1: that we've tried to make sure that we've taken what
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  Speaker 1: was a higher standard before and elevated it. We began
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  Speaker 1: looking at PPE orders back March seventh, you know, back
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  Speaker 1: the floor. You know, it was really you know, starting
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  Speaker 1: to affect um our business and we were seeing any
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  Speaker 1: positive cases at all. UM we were in a four
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  Speaker 1: week que to get p P and e P pe
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  Speaker 1: U ordered. We've made available to every frontline worker in
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  Speaker 1: masks because we believe it is essential when they're going
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  Speaker 1: in and out of a client's home. There's no way
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  Speaker 1: and you're providing personal care or skilled care in the
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  Speaker 1: home that you can be uh six ft apart and
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  Speaker 1: do that type of care. So making sure that we
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  Speaker 1: contain UM the virus and not have it spread to
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  Speaker 1: our most vulnerable, keeping people at home, allowing them to
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  Speaker 1: recuperate if they get it at home and not further
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  Speaker 1: over tax our hospital systems. UM. It's how we've really
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  Speaker 1: tried to lean in and be part of the crisis.
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  Speaker 1: I think generally what we've seen across the industry is
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  Speaker 1: where you have much more people coming and going or
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  Speaker 1: clustering of people. So you've seen nursing homes much harder
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  Speaker 1: hit UM. And in the homes we had to really
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  Speaker 1: you know, draw a fineline on those where we had
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  Speaker 1: UM deployed PPE early UM. But some of the hospice
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  Speaker 1: and Medicare home health that might be coming in and
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  Speaker 1: out of the same home or not UH, so we
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  Speaker 1: required if they were going to that we were educating
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  Speaker 1: a family on what those UM employees of other agencies
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  Speaker 1: should have if they're coming in out of the same home.
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  Speaker 1: So we kept the clients safe, but also our workers
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  Speaker 1: UM that would be coming in and out of that environment.
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  Speaker 1: Because the cases that we did see early we're from
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  Speaker 1: a hospice worker, Medicare home health worker that UH tested
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  Speaker 1: positive and then we know that our worker had been
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  Speaker 1: exposed and most of those cases our worker did not
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  Speaker 1: contract UM. But we increased our standards for the home
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  Speaker 1: for our caregiver, but also the partners in the care
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  Speaker 1: continuum that we were alongside up on a daily basis. So, Shelly,
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  Speaker 1: have you in the home healthcare space seen a surge
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  Speaker 1: in demand? As you know, this coronavirus puts people in hospital,
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  Speaker 1: but but then maybe they come out of hospital, or
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  Speaker 1: maybe people choose home healthcare versus going into what it
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  Speaker 1: seems to be a much higher risk UH nursing home
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  Speaker 1: or or ty type of environment. Yeah, I think you've
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  Speaker 1: seen an interesting trend over six weeks. So I think
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  Speaker 1: we're starting to see a surge and referrals were at
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  Speaker 1: all time high the last ten days in terms of
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  Speaker 1: referrals UM and inquiries for care UH compared to the
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  Speaker 1: three or four months prior. So I think you're starting
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  Speaker 1: to see people come through hospital stays, get ready for
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  Speaker 1: discharge and want to go into a home environment and
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  Speaker 1: have that care continuing them to rebuild their um UM,
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  Speaker 1: their ability to ward off anything else UM and and
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  Speaker 1: safely transitioned to the home. UH. During the early stages
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  Speaker 1: of the crisis, we UM saw you know, quite a
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  Speaker 1: few of our clients and we've been tracking it. We've
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  Speaker 1: had over we service about fifteen to twenty thousand families
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  Speaker 1: UM in forty states. We had about three hundred four
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  Speaker 1: hundred clients across the country kind of early stage mid
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  Speaker 1: March stop care. UM. We've seen about ten to fifteen
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  Speaker 1: percent of those sents come back because we're tracking that
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  Speaker 1: as well. UM, where I think people thought it might
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  Speaker 1: be a two to four week uh scenario and now
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  Speaker 1: as we look at that and it's more months, maybe
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  Speaker 1: over a year UM in terms of vaccination and completely
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  Speaker 1: being able to kind of return safely out to that
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  Speaker 1: environment for the most at risk population. UH. So I
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  Speaker 1: think what we saw as original drop off, somebody's starting
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  Speaker 1: to recover. Shelley, your company has over twenty caregivers and
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  Speaker 1: four thousand nurses, and you're in one area of the
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  Speaker 1: economy that may be a bright spot for hiring right
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  Speaker 1: now of it an unprecedented surge of layoffs, and I'm
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  Speaker 1: wondering how easy it is for you to find individuals
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  Speaker 1: to higher at this time and just in general as
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  Speaker 1: the President seeks to limit some of the immigration going forward. Yeah,
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  Speaker 1: I think it's a great question. I think, um, you know,
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  Speaker 1: up until we were able to deploy Ppe, which happened
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  Speaker 1: last UH last week m beginning UM of the week,
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  Speaker 1: we were able to start to ploint Ppe. I think
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  Speaker 1: now it's becoming easier for us to be able to
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  Speaker 1: give the message that we're able to keep our caregivers
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  Speaker 1: safe as well as encouraging to come to or back
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  Speaker 1: to the workforce. But I think that was I think
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  Speaker 1: that's still a difficult call. Even though there are jobs available,
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  Speaker 1: many don't have child care for their children. Uh schools
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  Speaker 1: are closed. Most of our caregivers across the country are
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  Speaker 1: working moms, oftentimes single moms. Uh so having the desire
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  Speaker 1: to want to serve and take care of our mos vulnerable,
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  Speaker 1: but at the same time having your own children to
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  Speaker 1: deal with and a round four, there's some you know,
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  Speaker 1: language being introduced in terms of heroes fund um. I
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  Speaker 1: think that's absolutely critical that we're thinking about our frontline
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  Speaker 1: healthcare workers. Right now, that language is limited to only
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  Speaker 1: those that are building the federal, state, local, or tribal governments,
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  Speaker 1: and we think that that needs to be expanded to
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  Speaker 1: anyone who's keeping the at risk population from over taxing
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  Speaker 1: a health system and keeping them safe and reducing the
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  Speaker 1: number of at risk. And so we'll be looking for
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  Speaker 1: that in our engagement with our members of Congress for
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  Speaker 1: round four just quickly here, Shelley, I'm wondering, are you
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  Speaker 1: finding that you're having to increase the salaries of individuals
• 6:58
  Speaker 1: in order to entice that that now we would absolutely
• 7:01
  Speaker 1: and we have done that and then rolled out that
• 7:03
  Speaker 1: capability to our franchisees probably about three weeks ago, to
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  Speaker 1: be adding kind of an incentive type of pay. I
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  Speaker 1: think we've called it kind of a safe, safe safety
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  Speaker 1: pay uh for our caregivers to encourage them to come
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  Speaker 1: back when they we do know that they're at home.
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  Speaker 1: Costs are higher in terms of having to arrange for
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  Speaker 1: child care that schools are not able to provide today,
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  Speaker 1: and wanting to be cognizant of that. UM And even
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  Speaker 1: though you know, the industry kind of banded together and
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  Speaker 1: was successful in getting an exemption for f f C
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  Speaker 1: R A at the same time that Saturday night, we
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  Speaker 1: you know, did you know, declare victory with our franchisees.
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  Speaker 1: The immediate communication from me to the franchisease UM was
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  Speaker 1: just because we don't have to pay, it doesn't mean
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  Speaker 1: we shouldn't if any of our caregivers are symptomatic, um,
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  Speaker 1: you know, not feeling well or have contracted the virus.
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  Speaker 1: We should still make sure they're not having to worry
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  Speaker 1: about where their next meal is going to come from
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  Speaker 1: and how their families are going to be taken care of.
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  Speaker 1: So we have stood stood by that position as a
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  Speaker 1: brand and at the local level buy our franchisees as well.
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  Speaker 1: So I think we're trying to balance the right things.
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  Speaker 1: We have a vulnerable population. We need to be able
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  Speaker 1: to take care of an f f c R A
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  Speaker 1: exemption was criticals were also being able to do that,
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  Speaker 1: but at the same time, we want to make sure
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  Speaker 1: our workers are well protected and we can recruit the
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  Speaker 1: numbers necessary. That's going to become a challenge as more
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  Speaker 1: people want to pivot and stay at home. Uh, So
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  Speaker 1: we're looking for any and all ideas to do that.
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  Speaker 1: Shelly Son, thank you so much for joining us. Shelley's
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  Speaker 1: the CEO and founder bright starcare talking about the in
• 8:30
  Speaker 1: home care market, which is facing unprecedented demands the population
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  Speaker 1: deals with the coronavirus. But very interesting to get her
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  Speaker 1: perspective on in home healthcare. This is Bloomberg. Paul, there's
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  Speaker 1: a story that caught my attention in the past week. Disney,
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  Speaker 1: a company that you have tracked for years, stopped paying
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  Speaker 1: a hundred thousand workers, which is roughly half its workforce,
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  Speaker 1: laying them off even as it protects executive own as
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  Speaker 1: schemes and a one and a half billion dollar dividend
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  Speaker 1: payment due in July. This has raised a lot of
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  Speaker 1: ire among a lot of people, particularly with respect to
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  Speaker 1: executive compensation, but also the dividend payment. Should they continue
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  Speaker 1: to pay a dividend as they lay off tens of
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  Speaker 1: thousands of workers to go on the public role? This
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  Speaker 1: is a question in the forefront of many minds, both
• 9:23
  Speaker 1: investment minds as well as political ones, and John Tobin
• 9:26
  Speaker 1: has been thinking about it as well. He joins us
• 9:28
  Speaker 1: now portfolio manager of Epic Investment Partners. And you believe
• 9:31
  Speaker 1: that the companies should still maintain their dividends despite some
• 9:35
  Speaker 1: of the catastrophic hits to earnings as well as the
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  Speaker 1: layoffs that we're seeing that are now numbering into the millions.
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  Speaker 1: Why well, at least I think I'd probbably take a
• 9:45
  Speaker 1: more nuanced approach to answering that question. I think our
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  Speaker 1: view is the way I had expressed it is, we
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  Speaker 1: expect companies to continue to follow sound capital allocation practices
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  Speaker 1: and policy and I think we need to look at
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  Speaker 1: this question. We're on a company by company, situation by
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  Speaker 1: situation basis. If a company is doing reasonably well and
• 10:06
  Speaker 1: maintaining its revenues, earnings, and cash flows, even in this
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  Speaker 1: episode that we're working our way through, it has a
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  Speaker 1: commitment to pay dividends that it has promised to investors.
• 10:18
  Speaker 1: And that dividend, by the way, is a flow of
• 10:20
  Speaker 1: income two investors, so it doesn't go out into the
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  Speaker 1: void somewhere. Real people are getting that real dividend payment.
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  Speaker 1: So to cut off the dividend payment is a source
• 10:31
  Speaker 1: of income in many cases too many investors and many
• 10:34
  Speaker 1: retirees who depend on that source of income. So it's
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  Speaker 1: not as simple as it seems to be. Gee, times
• 10:41
  Speaker 1: are really tough. How can companies justify paying dividends in
• 10:45
  Speaker 1: this episode? And I think it's a it's a much
• 10:48
  Speaker 1: more complex problem in question than just that. So interesting,
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  Speaker 1: how do you feel about I mean, there's also some
• 10:56
  Speaker 1: discussion about companies john that are receiving I guess some
• 10:59
  Speaker 1: of this uh fiscal stimulus. Uh. And then also you know,
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  Speaker 1: should there be I guess conditions there to that stimulus
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  Speaker 1: in terms of executive compensation? Or dividends. Um, how do
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  Speaker 1: you think companies are approaching that and investors? Well, and
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  Speaker 1: I think that's a perfectly reasonable approach. If your business
• 11:20
  Speaker 1: is so fundamentally challenged in this episode that you need
• 11:23
  Speaker 1: to apply for government aid, it's not at all unreasonable
• 11:27
  Speaker 1: that as a condition for receiving that aid, that you agree,
• 11:31
  Speaker 1: at least for a period of time, perhaps for the
• 11:33
  Speaker 1: period of time during which you're receiving the aid, to
• 11:36
  Speaker 1: halt dividend payments to shareholders, to halt share repurchase programs,
• 11:41
  Speaker 1: and to adjust the executive compensation levels. That's not unreasonable.
• 11:45
  Speaker 1: What is unreasonable, I would argue, is a mandate or
• 11:49
  Speaker 1: a directive to a company that says, regardless of whether
• 11:52
  Speaker 1: you apply or need aid, and regardless of whether your
• 11:56
  Speaker 1: business judgment tells you that you're generating enough revenues, are
• 12:00
  Speaker 1: and cash flow to maintain your promises to your shareholders,
• 12:03
  Speaker 1: you should stop anyway. I think that's problematic. That's fair,
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  Speaker 1: and I think that people are looking at companies that
• 12:11
  Speaker 1: are laying off significant swaths of their employees as candidates
• 12:16
  Speaker 1: for potentially cutting their dividends. I guess this push pull
• 12:19
  Speaker 1: that you talk about maintaining your promise to your shareholders
• 12:22
  Speaker 1: and trying to edifire balance shade at a time of
• 12:26
  Speaker 1: unprecedented distress. That these two that these two issues are
• 12:30
  Speaker 1: are really in stark contrast. I'm curious, from your perspective,
• 12:33
  Speaker 1: do you think that shareholders will take a more active
• 12:35
  Speaker 1: approach in rewarding companies that act perhaps in a more
• 12:40
  Speaker 1: socially responsible I use that word. I hate using it
• 12:43
  Speaker 1: because it could mean anything to anyone, but in a
• 12:46
  Speaker 1: way that reflects something that that feels right, whatever that
• 12:49
  Speaker 1: means to them. Well, that's an interesting question, and I
• 12:54
  Speaker 1: suppose that there will be that sentiment out there that
• 12:57
  Speaker 1: people will look at a company and say, do I
• 12:59
  Speaker 1: like this company? They did the right thing, whatever that
• 13:02
  Speaker 1: actually means. But I would also say, from you know,
• 13:05
  Speaker 1: from my perspective as a portfolio manager on a strategy
• 13:07
  Speaker 1: that invests in companies, that we look for companies that
• 13:11
  Speaker 1: have sustainable, growing cash flows, that support sustainable, growing shareholder distributions,
• 13:17
  Speaker 1: and we expect those companies to invest in the business
• 13:20
  Speaker 1: and grow. We expect those companies to make a decision,
• 13:24
  Speaker 1: a capital allocation decision. Can I invest to earnermate a
• 13:27
  Speaker 1: return about my cost of capital and to the extent
• 13:29
  Speaker 1: that I cannot, then I should return night capital to
• 13:32
  Speaker 1: the owners of the business. And those are the kinds
• 13:34
  Speaker 1: of companies that were looking for so for me, and
• 13:37
  Speaker 1: I think from a sound corporate governance and corporate finance
• 13:41
  Speaker 1: standpoint that that should be the driving principle for these
• 13:45
  Speaker 1: corporate management teams and rather than doing the right thing
• 13:50
  Speaker 1: and cutting dividends just because of the the bad optics
• 13:57
  Speaker 1: of paying dividends. So, John, what are some of the
• 14:00
  Speaker 1: sectors or companies that you guys are looking at now?
• 14:04
  Speaker 1: Given again, just this tremendous dislocation that we've seen in
• 14:07
  Speaker 1: the economies and in the markets. We've got some more
• 14:10
  Speaker 1: jobless claims today. That just confirms how rough things are
• 14:13
  Speaker 1: out there. How are you navigating it? Well, it's it's
• 14:17
  Speaker 1: tough to navigate, to be sure. It's it's an unprecedented
• 14:20
  Speaker 1: situation that we're in. And our approach as we managed
• 14:23
  Speaker 1: the portfolio is to try to look really, really carefully
• 14:26
  Speaker 1: at each and every position that we have, an assess
• 14:29
  Speaker 1: the company's ongoing cash flow sustainability in this environment, sort
• 14:35
  Speaker 1: of weed out the ones that we think are weaker
• 14:37
  Speaker 1: and that we need to remove from the portfolio. But
• 14:39
  Speaker 1: I will tell you here we are in early days
• 14:42
  Speaker 1: of quarterly earnings, and we've already seen I think a
• 14:45
  Speaker 1: few companies maybe surprise the market with the degree of
• 14:49
  Speaker 1: resilience that they have in their underlying businesses. So, for example,
• 14:52
  Speaker 1: over the past week, Johnson and Johnson reported earnings and
• 14:56
  Speaker 1: raised their dividend. Procter and Gambell reported earning, maintained guidance
• 15:02
  Speaker 1: and raise the dividend. Travelers the insurance company reported recently
• 15:06
  Speaker 1: raised the dividend. Lockheed Martin reported and their results were
• 15:10
  Speaker 1: quite good. So across the economy, across multiple sectors, we're
• 15:15
  Speaker 1: actually seeing companies that are navigating themselves through this difficult
• 15:20
  Speaker 1: episode and maybe doing better than then you might expect.
• 15:25
  Speaker 1: And John, thanks so much for joining us to really
• 15:27
  Speaker 1: appreciate your thoughts and perspectives. John Toman he is portfolio
• 15:32
  Speaker 1: manager and senior research analysts for APOC Investment Partners UH
• 15:36
  Speaker 1: they have about eighteen billion under management. So some really
• 15:39
  Speaker 1: interesting thoughts there, Lisa, as it relates to dividends and
• 15:43
  Speaker 1: in some scenarios, John arguing that companies as proper asset
• 15:47
  Speaker 1: allocation should continue paying dividends, but clearly there's some some
• 15:51
  Speaker 1: issues there as it relates to fiscal stimulus. It's an
• 15:53
  Speaker 1: important point because people, real people get those dividends and
• 15:57
  Speaker 1: use them for income. But there's a question of what
• 15:59
  Speaker 1: it means to get government aid when you lay off
• 16:01
  Speaker 1: tens of thousands of workers and send them to the
• 16:04
  Speaker 1: public rules. And I think that this is going to
• 16:05
  Speaker 1: be a debate in the front and center for a
• 16:07
  Speaker 1: long time to come. Let's talk markets right here, and
• 16:13
  Speaker 1: there's nobody, nobody better to do that with than our
• 16:15
  Speaker 1: good friend Barry Ridholtz. He's a Bloomberg opinion columnists and
• 16:18
  Speaker 1: host of Masters in Business on Bloomberg Radio. Is also
• 16:21
  Speaker 1: the founder, chairman and chief investment officer of rid Holts
• 16:24
  Speaker 1: Wealth Management. So he wears a lot of hats. So, Barry,
• 16:27
  Speaker 1: as we take a look at this little snap back
• 16:28
  Speaker 1: in the green here today, how do you square that
• 16:31
  Speaker 1: with you know, another very sobering jobless claims number of
• 16:37
  Speaker 1: four point four million. Yeah, everybody looks at the weekly
• 16:41
  Speaker 1: jobless numbers as if it's breaking news and and the
• 16:45
  Speaker 1: reality is that really is an amalgam of all fifty states.
• 16:49
  Speaker 1: The data they released released during the prior seven days.
• 16:53
  Speaker 1: By the time the BLS releases his state. By the
• 16:57
  Speaker 1: time the federal government releases the national data, anyone who
• 17:02
  Speaker 1: wanted to assemble that from by a state by state
• 17:05
  Speaker 1: basis could have done it. So it's kind of old news.
• 17:09
  Speaker 1: I know that sounds silly because everybody waits with bated breath,
• 17:13
  Speaker 1: but you can really reverse engineer that pretty easily a
• 17:18
  Speaker 1: couple of days earlier. Plus, is anybody surprised by this
• 17:23
  Speaker 1: data at all? We've We've watched twenty two million people
• 17:27
  Speaker 1: file for unemployment for the previous month. Nothing has changed.
• 17:30
  Speaker 1: We're still under lockdown. People are still having a hard
• 17:33
  Speaker 1: time getting through to their state unemployment office, so we
• 17:37
  Speaker 1: know the numbers are probably undercounted because of that challenge.
• 17:42
  Speaker 1: As long as we're under lockdown, maybe the starts to
• 17:46
  Speaker 1: flatten out to four or three or two million a week.
• 17:50
  Speaker 1: But you know, we're somewhere between twenty and of the
• 17:55
  Speaker 1: people who had a paying, full time job in March
• 17:59
  Speaker 1: no longer to do, and that's a huge number with
• 18:03
  Speaker 1: enormous economic ramification. Yeah, I was just looking at a
• 18:07
  Speaker 1: Pew survey that shows it about stept forty of US
• 18:11
  Speaker 1: adults say that someone in their household has lost a
• 18:14
  Speaker 1: job or taken a pay cut to the outbreak. I'm
• 18:17
  Speaker 1: just trying to extrapolate this out as we pair this
• 18:20
  Speaker 1: dismal data with the optimism and markets as to what
• 18:24
  Speaker 1: exactly people are looking to. Is this a bet on
• 18:27
  Speaker 1: the Federal Reserve and US government that they will pump
• 18:30
  Speaker 1: enough money into markets to inflate asset prices and perhaps
• 18:34
  Speaker 1: give a little bit of a lifeline to enough of
• 18:36
  Speaker 1: the population to enable a recovery in fairly short order.
• 18:42
  Speaker 1: I think it's a couple of different factors depending on
• 18:45
  Speaker 1: your time frame. If you're a short term trader, you
• 18:48
  Speaker 1: look at the market that falls that create in in
• 18:53
  Speaker 1: four weeks, that creates a tremendously oversold condition. Once the
• 18:57
  Speaker 1: rubber band gets too stretched too far in one direction,
• 19:01
  Speaker 1: We've seen it time and again, it tends to snap back,
• 19:05
  Speaker 1: at least part way. On a temporary basis, No markets
• 19:10
  Speaker 1: go on a straight line. Every bull market is has
• 19:14
  Speaker 1: counter trends, down trends that punctuated, just like every bear
• 19:18
  Speaker 1: market has these vicious rallies that that move in the
• 19:21
  Speaker 1: opposite direction. So so that's just a short term basis.
• 19:25
  Speaker 1: The longer term perspective is we don't think this is
• 19:29
  Speaker 1: gonna last forever. We do see signs that we are
• 19:33
  Speaker 1: either at or near the peak, if if not past it.
• 19:37
  Speaker 1: For from New York. Other states are still on the upswing.
• 19:40
  Speaker 1: But you know, there's a little bit of light at
• 19:43
  Speaker 1: the end of the tunnel. We just don't know if
• 19:46
  Speaker 1: it's daylight or an oncoming train, which is why we
• 19:49
  Speaker 1: haven't recovered fully. So it's an interesting barrier, like you
• 19:54
  Speaker 1: probably put me into more cautious stance as it relates
• 19:56
  Speaker 1: to the duration of these lockdowns and quarrant keens and
• 20:00
  Speaker 1: potentially reopening the um you know, the economy, if you will. UM.
• 20:05
  Speaker 1: So with that backdrop, is this a market that might
• 20:08
  Speaker 1: be just bouncing along for number of months and or
• 20:13
  Speaker 1: quarters until we really get that definitive view of Okay,
• 20:18
  Speaker 1: we've got the testing, or we've got some antibodies or
• 20:21
  Speaker 1: what there's we're closer to that vaccine. Is this something
• 20:24
  Speaker 1: that just says this is going to hold this market
• 20:25
  Speaker 1: and check well, you know, nobody knows if it's late
• 20:29
  Speaker 1: twenty or twenty one or early twenty two that you
• 20:32
  Speaker 1: could check off all the boxes. Here, here's the full testing,
• 20:37
  Speaker 1: here's the contact tracing, here's the antibody um uh protocol
• 20:42
  Speaker 1: that will allow people who don't have it to at
• 20:44
  Speaker 1: least develop some form of immunity. Whether it's full or partial,
• 20:48
  Speaker 1: we don't know. We don't know about the protocols, the
• 20:51
  Speaker 1: therapies that turn this from a potentially fatal disease UH
• 20:55
  Speaker 1: to a manageable disease. Look look at things like AIDS.
• 20:57
  Speaker 1: You never get curtive AIDS, but it be ums um
• 21:01
  Speaker 1: there's a therapeutic that manages it. So whether that's six
• 21:06
  Speaker 1: months or a year or two years, the market doesn't say, Okay,
• 21:10
  Speaker 1: this is the economy is going to halt and we're
• 21:13
  Speaker 1: going to go to zero. It's trying to balance between
• 21:17
  Speaker 1: the short term drop of earnings and revenue and what
• 21:21
  Speaker 1: were the forecasts for hundred and seventy five dollars on
• 21:25
  Speaker 1: the SMP, maybe that drops to pick a number, a
• 21:29
  Speaker 1: hundred bucks. Uh. We're all spit bowling when we're trying
• 21:32
  Speaker 1: to come up with revenue and profit projections for but
• 21:36
  Speaker 1: I think we're all pretty confident that by certainly those
• 21:43
  Speaker 1: numbers come back. Now now there's a longer debate to
• 21:48
  Speaker 1: be had about profit margins and leverage and how freely
• 21:53
  Speaker 1: UH and inexpensively, capital has been h and debt has
• 21:56
  Speaker 1: been extended, and what might happen with the corporate tax
• 21:59
  Speaker 1: rate postal election. That's a whole different conversation. In the
• 22:05
  Speaker 1: front and center for investors is trying to figure out
• 22:08
  Speaker 1: what data will look at in order to determine the
• 22:10
  Speaker 1: scope and the length of this pandemic of this issue.
• 22:14
  Speaker 1: And joining us now as someone who has h an
• 22:16
  Speaker 1: interesting take on this, Sam Hendall, president of leven Easterly
• 22:19
  Speaker 1: with three point six billion dollars of assets, also the
• 22:23
  Speaker 1: founder of Data Minor, which is very important as it
• 22:27
  Speaker 1: comes to assessing the current crisis. Sam, As you devise
• 22:31
  Speaker 1: an investment strategy, what data are you looking at? Sure?
• 22:36
  Speaker 1: At least on Paul, how are you? Um, We're really
• 22:39
  Speaker 1: looking at um? You know, UM. Really what we do,
• 22:43
  Speaker 1: we're value investors and the most important thing for us
• 22:47
  Speaker 1: is talking to companies, talking to the management teams and
• 22:50
  Speaker 1: really getting a firm understanding of what's going on in
• 22:52
  Speaker 1: their business. And that's on the micro level. On the
• 22:55
  Speaker 1: macro level, there are a lot of data points that
• 22:57
  Speaker 1: are coming out and you know, I certain they do
• 23:01
  Speaker 1: do use Data Minor UM, a company I found with
• 23:04
  Speaker 1: to my College roomates about eleven years ago. UM, and
• 23:06
  Speaker 1: that company is really on the forefront of UM, getting
• 23:10
  Speaker 1: information from social media and about ten thousand other sources. UM.
• 23:14
  Speaker 1: Right now, we're we're working with a lot of the
• 23:16
  Speaker 1: government agencies who are on the front lines of this.
• 23:19
  Speaker 1: And I'm seeing data on outbreaks ahead of time, so
• 23:23
  Speaker 1: sort of you know, before the testing hits, what people
• 23:26
  Speaker 1: are saying on the ground, UM, and we are using
• 23:29
  Speaker 1: that to sort of determine, you know, and I think
• 23:31
  Speaker 1: it's a very difficult question how long is it gonna
• 23:34
  Speaker 1: take for our for our economy to reopen. So on
• 23:36
  Speaker 1: the investment side, UM, we are really talking to our
• 23:39
  Speaker 1: companies and not trying to you know, not not really
• 23:43
  Speaker 1: trying to to aim and guess what the timing is
• 23:45
  Speaker 1: for things to reopen, but still finding good businesses that
• 23:49
  Speaker 1: are down in value, chief on a free cash law
• 23:51
  Speaker 1: basis and have catalysts to unlock them and some things
• 23:54
  Speaker 1: that might be defensive in this time, but also have
• 23:57
  Speaker 1: some offensive components that we can take advantage of, you know,
• 24:00
  Speaker 1: these companies when the world reopens again. So, Sam, what
• 24:04
  Speaker 1: are some of those sectors that you think have some
• 24:06
  Speaker 1: of those characteristics characteristics? Sure, I mean, the most defensive
• 24:11
  Speaker 1: sector you know, clearly has been consumer staples, healthcare, UM.
• 24:16
  Speaker 1: These there are a lot of companies that are actually
• 24:18
  Speaker 1: doing well in this environment, and it's unusual. The consumer
• 24:21
  Speaker 1: has completely shifted spending. Everyone's staying at home and ordering
• 24:25
  Speaker 1: or ordering food in whether it's grocery or even some delivery.
• 24:30
  Speaker 1: And they're spending money on telecom, they're spending on the
• 24:33
  Speaker 1: on their wireless bills, they're spending on cable and entertainment,
• 24:36
  Speaker 1: but a lot of the other consumer discretionary has gone
• 24:38
  Speaker 1: out the window. And we're really looking at trying to
• 24:41
  Speaker 1: find a combination of defensive defensive sectors and defensive defensive
• 24:45
  Speaker 1: stocks within those sectors, but also looking at, you know,
• 24:48
  Speaker 1: stocks that have been very hard hit by this, whose
• 24:51
  Speaker 1: businesses is impaired in the near term, but who has
• 24:54
  Speaker 1: a strong balance sheet and can survive this and has
• 24:58
  Speaker 1: a very strong business coming other crisis. So it's a
• 25:01
  Speaker 1: combo of really positioning our portfolio to take advantage of
• 25:05
  Speaker 1: the companies that are succeeding in this environment, and then
• 25:07
  Speaker 1: companies that we think will be the best to bounce
• 25:10
  Speaker 1: back UM once things go back to work. I've heard
• 25:14
  Speaker 1: a lot of people say that there are going to
• 25:16
  Speaker 1: be a lot of opportunities emerging from this crisis, and
• 25:18
  Speaker 1: we certainly see a rapidly increasing pace of credit funds
• 25:22
  Speaker 1: being raised by the likes of Oak Tree and Fortress.
• 25:25
  Speaker 1: I'm trying to understand, though, how you get to a
• 25:28
  Speaker 1: place where you can take advantage of these opportunities. Did
• 25:30
  Speaker 1: you have excess cash going into this? Are you selling
• 25:33
  Speaker 1: existing positions that you think are just going to be
• 25:35
  Speaker 1: out of money for a long period of time. Yeah, well,
• 25:39
  Speaker 1: we we've certainly shifted our portfolio in a significant way. UM.
• 25:42
  Speaker 1: We we really didn't have much exposure to travel names
• 25:46
  Speaker 1: or um, you know, the cruise lines or airlines or
• 25:48
  Speaker 1: anything like that. Um. But you had a period in
• 25:51
  Speaker 1: really mid March, mid to late March which was a
• 25:54
  Speaker 1: tremendous amount of chaos and people were selling stocks and
• 25:58
  Speaker 1: it was really I I joked, the the computers are
• 26:01
  Speaker 1: selling and so you have all this quantitative and algorithmic selling.
• 26:04
  Speaker 1: And you know, for people like us who are talking
• 26:06
  Speaker 1: to the management teams and understanding the companies, UM, it's
• 26:10
  Speaker 1: you know, it's great that when when we talked to
• 26:12
  Speaker 1: a company who stock is down, um, and this is
• 26:15
  Speaker 1: the case with with Tyson Foods. Have a conversation with
• 26:18
  Speaker 1: them and they said, yeah, you know, our business is
• 26:20
  Speaker 1: doing great. Um, We're not selling to the prepared food markets,
• 26:23
  Speaker 1: but we're selling UM. We we've shifted those supply chains
• 26:27
  Speaker 1: and we are you know, selling a lot into the
• 26:29
  Speaker 1: grocery store and we can't sell enough chicken to people, um,
• 26:32
  Speaker 1: and we can take advantage of that during these you know,
• 26:35
  Speaker 1: during these challenging times. So, Sam, I guess one of
• 26:38
  Speaker 1: the questions is just from stepping back and looking at
• 26:41
  Speaker 1: the markets that had that big plus move peaked trough
• 26:45
  Speaker 1: there in that March period that you were just referencing,
• 26:47
  Speaker 1: but since then we've had you know, almost a fifty
• 26:50
  Speaker 1: retracement back up. How do you how are you viewing
• 26:53
  Speaker 1: the market overall? Do you think there's risk that we
• 26:55
  Speaker 1: retest loads um in the context of a longer bear market. Yeah,
• 27:01
  Speaker 1: I do think that, you know, this is a this
• 27:04
  Speaker 1: is not a blip. UM. The the the the change
• 27:07
  Speaker 1: in the economy right now and the uncertainty around what's
• 27:10
  Speaker 1: happening and the ability for companies to to resume normal operations. UM,
• 27:16
  Speaker 1: it's very challenging to figure out. So I don't think
• 27:18
  Speaker 1: this is a blip. I think this is you know, similar,
• 27:22
  Speaker 1: and it's a very different type of crisis than the
• 27:24
  Speaker 1: global financial crisis in two thousand and eight. UM. But
• 27:26
  Speaker 1: we are following that playbook here. UM. We're trying to
• 27:29
  Speaker 1: hit singles. We're not trying to call the bottom UM
• 27:32
  Speaker 1: at leaving Easterly. We're certainly are. Our Our mission is
• 27:36
  Speaker 1: to know our companies and we have a concentrated portfolio
• 27:39
  Speaker 1: about thirty five to forty names UM that we know
• 27:42
  Speaker 1: very well and we know their management teams, and we're
• 27:45
  Speaker 1: really looking to UM take advantage of some of these dislocations.
• 27:49
  Speaker 1: And my view on the markets, I do think the
• 27:51
  Speaker 1: market may have snapped that you know this the the
• 27:54
  Speaker 1: sell off was you know, UM without regard to specific companies,
• 27:59
  Speaker 1: and now we're seeinging you know some I guess order
• 28:02
  Speaker 1: in the chaos where you're seeing the companies that are
• 28:04
  Speaker 1: doing a little better start to outperform. That have you
• 28:06
  Speaker 1: know that that that have a little bit more of
• 28:09
  Speaker 1: of a clear path. But it's still a very uncertain
• 28:12
  Speaker 1: time and we're just trying to keep a clear head
• 28:15
  Speaker 1: and UM follow our playbook from O. Eight and No. Nine,
• 28:18
  Speaker 1: buying those good companies with good balance sheets that are
• 28:21
  Speaker 1: down and out of favor, and um, and we think,
• 28:23
  Speaker 1: you know, in a long term, whether coronavirus um, you know,
• 28:27
  Speaker 1: comes back in in the fall winter, or we're not
• 28:30
  Speaker 1: able to open up the economy for a while, that
• 28:33
  Speaker 1: they still have enough ballast to be okay during that
• 28:36
  Speaker 1: period and they'll do very well whenever the whenever the
• 28:39
  Speaker 1: economy opens. We're speaking with Sam Hendel, president of eleven
• 28:42
  Speaker 1: Easterly with three point six billion dollars of assets under management.
• 28:45
  Speaker 1: Sam uh, It's it's a very tricky times. So much
• 28:49
  Speaker 1: of the economy depends on science and on the medical
• 28:52
  Speaker 1: community and the fight against the coronavirus, which has put
• 28:55
  Speaker 1: investors in this awkward position of having to moonlight as virologist.
• 29:00
  Speaker 1: A virologists they try to bet on when the economy
• 29:03
  Speaker 1: may reopen. What specific data points are you looking at
• 29:07
  Speaker 1: determine that path, given that even medical professionals basically are
• 29:11
  Speaker 1: shrugging your shoulders and saying, we just don't know. Yeah,
• 29:15
  Speaker 1: And I'm certainly I think everyone's unfortunately moonlighting as a
• 29:19
  Speaker 1: as a as as a late night viroologist here. Um,
• 29:22
  Speaker 1: but um, you know, we're we're we're we're not trying again,
• 29:25
  Speaker 1: we're not trying to call that bottom. But the data
• 29:27
  Speaker 1: points I'm looking at, we're looking at a number of
• 29:29
  Speaker 1: cases per day hospitalizations, UM. And you see the trend
• 29:33
  Speaker 1: line the US has has flattened the curve. UM you're seeing.
• 29:37
  Speaker 1: You know, today in New York we have fewer hospitalizations
• 29:40
  Speaker 1: than we have yesterday. That's a big positive. And so
• 29:43
  Speaker 1: I do view that as a you know, a cautious
• 29:45
  Speaker 1: yellow light for maybe being a little more offensive in
• 29:49
  Speaker 1: our portfolio. That being said, UM, some of the data
• 29:52
  Speaker 1: I'm seeing from from my source at Data Minor, UM,
• 29:56
  Speaker 1: I see, you know, really about ten to twelve days
• 29:58
  Speaker 1: before the caseload. It's I can see hotspots around the
• 30:01
  Speaker 1: country and around the globe. UM. I'm very concerned about
• 30:05
  Speaker 1: the South. UM in the US. UM. India could be
• 30:08
  Speaker 1: a dramatic humanitarian disaster that we just don't know about yet.
• 30:13
  Speaker 1: And you know, some countries in Europe and South Korea
• 30:16
  Speaker 1: in particular, have done a great job on testing. We
• 30:19
  Speaker 1: haven't done a great job here and we just don't
• 30:21
  Speaker 1: have enough tests. And so you know, I think it's
• 30:24
  Speaker 1: very challenging for the economy to reopen. And when we're
• 30:26
  Speaker 1: flying blind here, and I sort of take the example
• 30:29
  Speaker 1: of you know, uh, the meat packing facilities that are
• 30:32
  Speaker 1: closed right now. Um, there are three big pork facilities
• 30:34
  Speaker 1: that are closed around the country. UM. You know what happens,
• 30:39
  Speaker 1: you know, if if we reopened the economy and there's
• 30:41
  Speaker 1: a case at a school or at at at at
• 30:44
  Speaker 1: a plant facility, what's the path that we take. Are
• 30:47
  Speaker 1: we able to test all these employees on a day
• 30:49
  Speaker 1: to day basis? And right now we're just not And
• 30:51
  Speaker 1: we need to build up that capacity. I think before
• 30:53
  Speaker 1: we can really get things moving in a faster way.
• 30:56
  Speaker 1: But I think we will open slowly. UM. But I'm
• 31:00
  Speaker 1: you know, I'm still cautious about the ability, um to
• 31:03
  Speaker 1: do it in a in a way where we have
• 31:05
  Speaker 1: procedures in place. I think individual companies are starting to
• 31:08
  Speaker 1: put that, you know, are starting to put together plans, um,
• 31:12
  Speaker 1: but we probably need a little more on the nationwide
• 31:15
  Speaker 1: basis on testing. Hey, Sam, thanks so much for joining us.
• 31:17
  Speaker 1: We really appreciate your thoughts there. Sam Hendel, president of
• 31:21
  Speaker 1: Levin Easterly joining us on the phone. We appreciate his thoughts.
• 31:27
  Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
• 31:29
  Speaker 1: You can subscribe and listen to interviews at Apple Podcasts
• 31:32
  Speaker 1: or whatever podcast platform you prefer. Paul Sweeney, I'm on
• 31:35
  Speaker 1: Twitter at pt Sweeney. I'm Lisa abram Boy. It's I'm
• 31:37
  Speaker 1: on Twitter at Lisa A. Bram Woit's One before the Podcast.
• 31:40
  Speaker 1: You can always catch us worldwide on Bloomberg Radio