Larry Robbins: Stocks Wont Dip Until We Get Real Inflation

Larry Robbins, Glenview Capital Management, discusses his firm’s eye on cheaper companies, and the low interest rate impact on the market.


the history of acquisitions is that many of them don’t meet the financial criteria that was initially set out. but in a low valuation environment with cheap money, you’re certainly — low valuation environment? many would say we’re not at low valuations. a couple of things on that. from our portfolio, we’re trading 12 1/2, 10 1/214, 15 times earnings, so the companies are cheaper. if we look at the broader market, 14, 15 times earnings on 2014 and 2015 numbers, if you look over the history of time, low interest rate scenarios, when interest rates are between 3%, 6%, the market averages 17 to 18 times earnings. everybody is talking about, what will happen if inflation rears its head, or interest rates rise, and what will happen through tapering? one of the things to realize, multiples in the markets don’t fall off until actual real inflation — not even expectations — but actual real inflation goes above 4%. that’s when multiples go from 17 times to about 14 times. we have a long ways to go. the fed has said when the expectations get to 2.5%, they’ll start tightening, but that’s a long way off. similar argument by david tepper, a similar hedge fund than yours. you’ve had a great year. does it color the way you operate this year or next year given the success so far? we operate versus the opportunity side that the market gives us. whether we’re down a quarter in a year, up in a quarter in the ye, we’ll look at the opportunity sets. it’s more about capital deployment and growth on growth, less unlocking untrapped value situations. but the opportunity is set not only for us but all of the people speaking today, that are the long/short equity panelists, the set is above average for all of us.

Larry Robbins bullish on hospital stocks

Larry Robbins, Glenview Capital Management, discusses the competitive environment for hospitals for profit and non-profit, and who will sign up for Obamacare.


of tim– you feel the successful implementation will only be good for the hospitals? yes. the hospitals are basic need. the for-profit hospitals are more efficient than the not-for-profit, so regardless of what the competitive environme is, they’ve fared better in the past. we believe there’s an accelerated growth coming. even though there may be a small number to start out. if you look at the outreach of who will sign people up, managed care company trying to sign up a healthy person and getting to pay for insurance they don’t want will be ineffective. if somebody shows up at the hospital and needs surgery in a month, right, and the hospital can say, well, we can perform this if — if we can get you medicaid eligible, or you sign up for an exchange and wait two, four weeks, can you have that surgery. of course, that person will sign up. what you’ll see is you’re not batting for average, but power, the right hitters are the ones that will sign up, and, therefore, that’s where you’ll see the benefit to uplifting the free cash flow for the hospitals. it will not happen magically in the first quarter. well, no, and listen, we’ve seen plenty of hospitals including when you were the biggest owner of hma, had difficult times in terms of executing on the business plan. sure. you made a decision to allow hma, i’m saying allow, but encourage them to take a deal on the table with community health. why? well, sure, consolidation is important. o we d believe there are too many hospital companies, that scale is important, and ultimately, offering a network of delivery systems where you can acquire the basic medical goods for the lowest costs, and, therefore, be more efficient, as well as you request then work with the state-based insurance exchanges to offer what will eventually been books an accountable care organization where can you serve more and more volume. we think that scale matters. you’ve seen two big deals. you saw the tenet deal for vanguard, and then the community deal for hma. the other irrefutable truth is the hma asset was in decline at the time throughout this year, and, in fact — at the time you ran the solicitation to replace the entire board of directors? absolutely. and so, there will be an operational turnaround and rolling up your sleeves and doing hard work internally in order to position the company for success. the steam is equipped to do that as part of a consolidation. to us, it made sense for us to make sure the process happened once through consolidation, rather than trying to turn the asset independently and move it towards consolidation. you’re one of the largest holders of community. yeah, 9.9% of community. we’re not alone. 60% of the hma are also community shareholders. this is about overlap. it’s bringing two companies that belong together all along together. and people will benefit further through the appreciation in the community shares.

Early implementation of Obamacare ‘atrocious’: Larry Robbins

How investors should look at the current problems with Obamacare’s website, with Larry Robbins, Glenview Capital Management. “There’s been no question implementation of Obamacare in its early days has been atrocious,” he says.


your portfolio, particularly the way it relates to the hospital stocks? for investors, it’s our job to interpret the policy rather than make public policy. our view is not to say what the policy should be but how it will play out. if you compare the launch to what happened when medicare part d was introduced in 2006, prior to that seniors didn’t have reimbursement for pharmaceuticals. when part d launched, there were problems with the system, the public’s attitude toward it was exceedingly negative. people thought it was a broken bill and two years later 71% of americans had a very positive view of medicare part d and the most important thing was

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