David Hay — Friday POW! #275: Quest Diagnostics
"A business that grows because people get older, sicker, and more health-aware (forces that do not reverse) at a price that reflects temporary margin optics."
One-line take: The weekly "POW!" pick is Quest Diagnostics (DGX) — America's largest independent lab network at the low end of its historical multiple after a sell-on-good-news quarter (fifth straight guidance raise) — and the post closes with the full Haymaker portfolio (a Buys list and a Trims/Holds list with cost basis and ratings), which now drives portfolio.json and the master table's ◆ pundit-portfolio filter.
1. Stocks & names mentioned
| Ticker | Name | Research | View | What he said | At |
|---|
| DGX | Quest Diagnostics | QT · SA · STK · FA | Positive | Pick of the Week — largest US independent lab network (~550k specimens/day, ~2,250 service centers) at ~18× forward EPS / ~5.5% FCF yield after a sell-on-a-beat quarter; fifth straight guidance raise, Fresenius/Corewell adding ~$330M revenue, AI Companion +40% agent productivity. "Gradual accumulators" at current levels or lower; PT $215–225 over 12–18 months. Key risk: a PAMA Medicare-reimbursement cut cycle. | read |
The post's closing Buys (42 lots) and Trims/Holds (56 lots) tables — the full Haymaker portfolio with price/cost/% change/rating per lot — are transcribed at the end of transcript.txt and captured in david-hay/portfolio.json (one entry per ticker). They are position lists, not discussed names, so they don't get mention rows here.
2. Talking points
The pick — Quest Diagnostics (DGX)
- An uncharacteristic sector for Haymaker (healthcare), chosen for strong business performance, "virtually no AI threat," and aging-population tailwinds.
- Q1 2026: revenue +9.2% (9.0% organic), requisition volume +10.9%, adj. EPS +13.1% — and the fifth consecutive quarterly guidance raise. The stock fell ~5% on the clean beat (transitional partnership margins), which Haymaker reads as a misread of earnings quality.
Valuation & technicals
- ~18× forward EPS (low end of its 17–22× history), ~11× EV/EBITDA, ~5.5% FCF yield on ~$1.2B implied FCF — "the most compelling entry-point metric." Consensus target ~$223 (~16% upside); zero Sell ratings among 22 analysts.
- Sitting on the 200-day (~$185–190) after a controlled pull-back to the up-trend line; recent all-time high means no "overhead supply." Q2 earnings in late July is the next catalyst.
The other side
- Most credible bear case: a PAMA Medicare-reimbursement cut cycle (deferred repeatedly, not permanently avoided). Plus Fresenius/Corewell integration execution, and wage/fuel inflation offsetting automation gains.
The portfolio disclosure
- The post ends with the complete Haymaker book: a Buys list (B/SB ratings — incl. multi-lot positions in EQT, GOLD/Barrick, NTR, RYAAY, SRUUF) and a Trims/Holds list (H/T — heavy in monster winners like IBKR +286%, PARR +244%, HBM +156%, NEM +141%, CSCO +131%).
- Housekeeping note: NOW (ServiceNow) appears on both lists but "is technically a Hold/Trim (for the moment)"; the duplicate will be removed next week.
3. In plain English
DGX — Quest Diagnostics Positive
Quest runs the biggest independent network of medical-testing labs in America — the blood panels your doctor orders, plus advanced genomic and cancer testing. It processes about 550,000 patient samples a day through infrastructure (2,250 collection sites, a fleet-and-lab logistics web) that took decades to build and would cost billions to copy. People getting older and sicker means test volumes grow for decades, and no AI chatbot can draw blood.
The stock sold off ~11% even though the company beat earnings and raised guidance for the fifth quarter in a row — the market disliked temporarily thinner margins from new hospital partnerships still ramping up. Haymaker's view: that's accounting optics, not deterioration, so you're buying a steadily compounding business at the cheap end of its usual valuation with a ~5.5% free-cash-flow yield. They're buying gradually here, targeting $215–225 within 12–18 months. The main real risk is government-set Medicare lab reimbursement rates being cut harder than expected.
Summary derived from the paid Haymaker newsletter (text in transcript.txt) for personal study. Not investment advice. © Haymaker / David Hay for source material.