💼 Inside the Portfolio: Updates from our Swing Trading Desk

19 Feb 2025 - Insights, adjustments, and forecasts about our latest swing trades 💹

Position Updates:

• Reduced another 1/4 of APPS last week

New Positions and Subscriber Insights:

Yesterday, we embarked on a new position, and today we experienced an inside day without our stop being triggered. We delayed writing the article until today to ensure the position's viability. This stock has been a topic in our newsletter over recent weeks, yet finding an optimal entry point proved challenging. With the market hovering near all-time highs, we must identify stocks that offer both solid value and favorable risk/reward from a technical standpoint. At the time of execution, we thoughtfully communicated this strategy to our premium subscribers through chat.

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1. SelectQuote Inc (SLQT)

SelectQuote, Inc. operates a technology-enabled, direct-to-consumer distribution platform that sells a range of insurance policies to consumers from various insurance carriers in the United States. The company operates through three segments: Senior; Life; and Auto & Home. It distributes senior health policies, such as medicare advantage, medicare supplement, medicare part D, and other ancillary senior health insurance-related policies, including prescription drugs, dental, vision, and hearing plans; term life policies; and non-commercial auto and home property, and casualty policies. The company was incorporated in 1999 and is headquartered in Overland Park, Kansas.

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As CEO Tim Danker highlighted, SelectQuote Inc. has showcased robust performance, particularly within its Medicare Advantage segment, during the recent annual enrollment period. This success is attributed to the company’s innovative, high-touch agent-led business model and strategic marketing efforts that have effectively captured market attention.

One noteworthy achievement in this segment is the significant reduction in marketing expenses, which decreased by 22% per policy year over year. This reflects cost efficiency and indicates that SelectQuote is successfully optimizing its customer outreach strategies. Concurrently, agent close rates have improved by 24%, underscoring the effectiveness of their trained agents in converting leads into policies. The senior division's Adjusted EBITDA margins stand impressively at 39%, emphasizing the profitability of this segment.

The Healthcare Services division, particularly through its subsidiary SelectRx, has also demonstrated remarkable growth and profitability. Membership has surged by 54% year over year to reach 97,000 members. This growth has significantly bolstered consolidated revenue, which increased by 19% to $481 million for the quarter. Within this figure, revenue from the senior segment amounted to $256 million, while healthcare services revenue was driven predominantly by SelectRx, with $183 million—an impressive 64% year-over-year increase.

CFO Ryan Clement elaborated further on financial performance metrics, noting that Adjusted EBITDA for the senior division reached $101 million with a strong margin of 39%. In a strategic move to enhance financial stability and flexibility for future growth initiatives, SelectQuote announced a $350 million preferred equity offering aimed at improving its capital structure and reducing annual cash interest obligations by an estimated $30 million.

Furthermore, SelectQuote raised its fiscal year 2025 revenue guidance to between $1.5 billion and $1.575 billion—up from a previous estimate of $1.425 billion to $1.525 billion—driven primarily by positive results from both the Medicare Advantage segment and SelectRx.

Despite these successes, management acknowledged ongoing challenges in optimizing their capital structure effectively. They are actively pursuing additional securitizations alongside other strategic actions to fortify their financial position moving forward.

In conclusion, SelectQuote's recent performance highlights solid growth across key segments with a focus on improved efficiency and member acquisition strategies. The combination of reduced marketing expenditures alongside increased agent productivity points toward a promising trajectory for continued success in an evolving healthcare landscape. With proactive measures being taken around capital structure optimization and guided growth initiatives for FY2025, SelectQuote appears well-positioned to navigate upcoming challenges while seizing new expansion opportunities.

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• Entry Point: We initiated our position at market open as the stock approached the critical resistance level of $5.80, which it subsequently breached to the upside following an initial dip. Observing bullish momentum, we strategically established our entry with a stop-loss set at the day's low. To optimize our risk-reward profile, we liquidated 20% of our holdings during the upward movement, effectively allowing us to retain a position in the stock at minimal cost.
  

• Support and Resistance Levels: Support is currently established at $5.20 on the daily chart. The first resistance level is at $6.70 on the daily, then $7.60

• Additional Notes: Earnings Play

Entry Day: 11 February

Price: $5.84

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