Adding Catasys (CATS) to the Tailwinds Select Portfolio

As of this morning, at a price of $4.03, we added Catays, Inc. (CATS) to our portfolio. Catasys leads the health care industry in improving health and reducing claims costs for health plan members with behavioral health (BH) disorders that cause or exacerbate co-existing medical conditions. By doing so, CATS is lowering overall health cares costs for insurers; the result of which is tremendous growth opportunities.

Here’s what they do. OnTrak™, a 52-week intensive outpatient program, treats an overlooked population: members suffering from chronic disorders such as substance use disorder, anxiety and depression who rarely seek care. These members cost health plans millions of medical dollars primarily due to preventable ambulance usage, medical ER visits and medical inpatient admissions. Despite having a BH diagnosis, their BH spending is relatively minor or non-existent.

Catasys’ program has a very high ROI for the insurance industry, making them a great partner for helping to lower overall healthcare costs. The company should get around $20MM in total revenues here in 2017, and is growing very rapidly. We believe that free cash flow is coming soon to CATS. The stock trades at a very low multiple and we expect the stock to be a big performer for the next couple years.

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