FA Alpha Weekly Digest - 03 20 2023

Wall Street’s stock picks can’t be trusted and the advertising bias of the mainstream financial media makes their news only sensationalist-driven. Gain an edge by knowing some of the well-established names in the market that are often overlooked.

We bring you the FA Alpha Weekly Digest, a roundup of FA Alpha’s unique and unparalleled equity, credit, and macroeconomic insights over the past week.

In today’s digest, we’ll take a look at the banking sector, Telecom Italia S.p.A. (TIT:ITA), AMN Healthcare Services (AMN), and Pershing Square Capital Management.

How to tell we had a ‘FOMO’ rally to start the year

National Association of Active Investment Managers (NAAIM) Exposure Index and stock market correlations are two key pieces of data that can tell us of the early signs of a new bull market. NAAIM Index gets its data from a weekly equity allocation survey about how much was invested while stock market correlations measure how different stocks perform against one another and the overall market. Many people are wondering if the worst of the downswing is already behind us and this key data will help us understand what’s going on.

These bank runs aren’t as they seem

The banking sector had a strong downtrend in the past week starting from Silvergate’s shutdown, Silicon Valley Bank’s collapse to the taking over of Signature Bank by regulators. These banks suffered from the same problem and raise speculations if other banks are also put in jeopardy.? Federal Deposit Insurance Corporation (FDIC) guaranteed depositors get at least some of their cash back and dissuaded depositors from rushing to withdraw their money. Consequently, these recent bank issues do not reflect a larger problem in the financial sector since these banks collapsed due to heavy exposure to industries that got crushed.

This expected transaction could change the fate of Italy’s largest telecom operator

Wanting to get rid of long time debt problems, Telecom Italia has been cleaning up its capital structure by selling its grid assets. KKR has already made a proposal to acquire these assets for 20 billion Euros that would significantly help the company reduce its debt and reshape its capital structure. Using Credit Cash Flow Prime?, we can say that its entire capital structure will be much safer and healthier once the transaction pushes through and the company pays off its debt maturities. This transaction has the potential to make or break Italy’s largest telecom operator.

The need for nurses means more demand for this staffing company

Healthcare services have seen big changes in its operations as a result of the pandemic. There is an increasing demand for healthcare services but it means it needs more workforce capacity. If unable to meet the demand, the shortage will create financial impact on hospitals so companies and the government launched a $1.8 billion program to create 1,000 new residency slots at hospitals in under-served communities. Staffing companies particularly working with hospitals like AMN Healthcare Services (AMN) are needed to cover the lack of nurses and has seen immense demand for its services since the pandemic.

The infamous activist short-seller made a living from a massive COVID trade

Bill Ackman correctly foresaw the potential disaster of the pandemic on financial markets in February 2020. He wanted to reduce his investments in Hilton (HLT) but didn't want to shun his reputation as a corporate raider by selling the stock. So, he chose to use CDS to hedge their position. In March 2020, WHO recognized COVID-19 as the pandemic, and the stock market crashed. Consequently, hospitality companies were among the most affected ones due to the lockdowns. With this trade, he made a 100-fold return. His initial investment in CDS was only about $27 million which later turned into a whopping $2.6 billion. Using Uniform Accounting, let’s take a look at his positions and see what he’s betting big on now.

We hope you find this week’s FA Alpha Daily articles insightful.

See you next week as we talk about another set of interesting names.

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