10 Best Healthcare Stocks to Buy According to Billionaire Larry Robbins

Published on July 6, 2022 at 9:14 am by Omer Farooq in Hedge Funds, News

In this article, we will discuss 10 best healthcare stocks to buy According to Larry Robbins. If you want to skip reading about Larry Robbins’ investment philosophy and his hedge fund’s returns, you can go directly to 5 Best Healthcare Stocks to Buy According to Billionaire Larry Robbins.

Larry Robbins is an American investor and hedge fund manager of Glenview Capital. Mr. Robbins started his career in finance at Greacher & Company after graduating from the University of Pennsylvania in 1992. He left his role at Greacher & Company after 3 years and went on to join Leon Cooperman’s Omega Advisors as a financial analyst on the fund’s U.S. equity long-short team. After serving as a financial analyst at Omega Advisors for six years, Mr. Robbins left the fund in 2000 and founded his own hedge fund, Glenview Capital. As of March 31, 2022, Larry Robbins manages more than $4.93 billion in 13F securities through his hedge fund. Moreover, according to Forbes, Mr. Robbins is worth $1.9 billion as of June 2022.

Larry Robbins’ Investment Strategies

Billionaire Larry Robbins has employed various investment strategies to acquire his fortunes. Mr. Robbins was featured in a 2007 article by The New Yorker in which he was described as a “hotshot who utilizes a variety of strategies.” Larry Robbins has focused on executing a hybrid of value and growth investment strategies and adopted a growth at a reasonable price, or GARP, investment approach toward stock investing. For Glenview Capital’s flagship fund, which he launched in 2001, Mr. Robbins employed a long-short strategy with a focus on equity and fixed-income categories. Mr. Robbins launched the Glenview Opportunity funds back in 2007. Mr. Robbins’ GO funds are modelled after an opportunistic investment approach and target underperforming and depressed companies which they hold and eventually sell at the optimal time for profits.

Glenview Capital’s Returns and Investment Portfolio

In the first quarter of 2020, Glenview Capital reported quarter-on-quarter gains of 26.43% from Q4 2019. Looking ahead at Q1 2021, Mr. Robbins’ hedge fund reported that its returns grew by 17.81% quarter-on-quarter from Q4 2020. Now in 2022, Glenview Capital’s quarter-on-quarter returns are down a negative 9.4% in Q1 2022.

However, Glenview Capital’s portfolio value increased by 5.1% in Q1 2022 to $4.94 billion, up from $4.69 billion a quarter ago. In the first quarter of 2022, Glenview Capital initiated 9 new positions and made additional purchases in 26 of its previously held securities. Billionaire Larry Robbins also dumped 6 stocks in the quarter and reduced his hedge fund’s stakes in 20 equities. The hedge fund has a top 10 holdings concentration of roughly 54.5% and has allocated a majority share of its investments to the healthcare sector.

Among Glenview Capital’s top healthcare stocks we have McKesson Corporation (NYSE:MCK), Bausch Health Companies (NYSE:BHC), and Cigna Corporation (NYSE:CI).

10 Best Healthcare Stocks to Buy According to Glenview Capital

Larry Robbins of Glenview Capital

Our Methodology

To pick the 10 best healthcare stocks to buy according to Larry Robbins, we reviewed Larry Robbins’ Q1 2022 investment portfolio. We included Glenview Capital’s top holdings from the healthcare sector in this list and ranked them in increasing order of stake of the hedge fund. Along with each stock, we have mentioned the analyst and investor sentiment around it.

To derive the hedge fund sentiment, we consulted Insider Monkey’s database which, as of Q1 2022, keeps track of roughly 900 elite hedge funds.

Best Healthcare Stocks to Buy According to Larry Robbins

10. HCA Healthcare, Inc. (NYSE:HCA)

Glenview Capital’s Stake Value: $79,404,000

Percentage of Glenview Capital’s 13F Portfolio: 1.6%

Number of Hedge Fund Holders: 62

HCA Healthcare, Inc. (NYSE:HCA) provides health care services in the United States. As of Q1 2022, Glenview Capital’s stakes in HCA Healthcare, Inc. (NYSE:HCA) are valued at $79.40 million. The investment covers 1.6% of Larry Robbins’ 13F portfolio.

On June 21, RBC Capital analyst Frank Morgan trimmed his price target on HCA Healthcare, Inc. (NYSE:HCA) to $256 from $267 but reiterated an Outperform rating on the shares.

As of June 28, HCA Healthcare, Inc. (NYSE:HCA) has a trailing-twelve-month PE ratio of 8.31 and a forward dividend yield of 1.25%, which makes it an undervalued dividend-paying healthcare stock to buy according to Larry Robbins.

At the close of Q1 2022, 62 hedge funds were long HCA Healthcare, Inc. (NYSE:HCA) with stakes worth $2.89 billion in the company. This is compared to 66 positions in the previous quarter with stakes of $2.98 billion.

Here is what First Eagle Investment Management had to say about HCA Healthcare, Inc. (NYSE:HCA) in its third-quarter 2021 investor letter:

“HCA Healthcare owns and operates 185 hospitals and approximately 2,000 sites of care in the US and UK. Admissions to its facilities, depressed during the worst of the Covid-19 outbreak in 2020, have begun to rebound. HCA reported a nearly 20% year-over-year increase in admissions during the second quarter and a 14% increase in revenue, and forecast that volume would continue to improve throughout the year. We maintain our positive opinion of the company’s management team, believing them to be effective stewards of both the balance sheet and HCA’s business operations.”

9. Universal Health Services, Inc. (NYSE:UHS)

Glenview Capital’s Stake Value: $89,705,000

Percentage of Glenview Capital’s 13F Portfolio: 1.81%

Number of Hedge Fund Holders: 40

Universal Health Services, Inc. (NYSE:UHS) operates acute care hospitals, and outpatient and behavioral health care facilities. On June 16, Loop Capital analyst Joseph France initiated coverage of Universal Health Services, Inc. (NYSE:UHS) with a Hold rating and a $115 price target.

As of March 31, Glenview Capital owns approximately 0.61 million shares of Universal Health Services, Inc. (NYSE:UHS) which brings the fund’s stake in the healthcare company to $89.70 million. The investment covers 1.81% of Larry Robbins’ 13F portfolio. Glenview Capital is also the third-largest shareholder in Universal Health Services, Inc. (NYSE:UHS).

As of June 28, Universal Health Services, Inc. (NYSE:UHS) has a price-to-earnings ratio of 9.23 and a dividend yield of 0.78%. This is another undervalued dividend-paying healthcare stock to buy according to billionaire Larry Robbins.

40 hedge funds were long Universal Health Services, Inc. (NYSE:UHS) with stakes of $623.14 million at the close of Q1 2022. This is compared to 35 positions in the preceding quarter with stakes of $681.80 million.

Among billionaire Larry Robbins’ top healthcare stocks we have McKesson Corporation (NYSE:MCK), Bausch Health Companies (NYSE:BHC), and Cigna Corporation (NYSE:CI).

8. Encompass Health Corporation (NYSE:EHC)

Glenview Capital’s Stake Value: $91,414,000

Percentage of Glenview Capital’s 13F Portfolio: 1.85%

Number of Hedge Fund Holders: 48

Encompass Health Corporation (NYSE:EHC) provides facility-based and home-based post-acute healthcare services in the United States. The company operates through two business segments: Inpatient Rehabilitation, and Home Health & Hospice. Glenview Capital is the third-largest shareholder in Encompass Health Corporation (NYSE:EHC).

In the first quarter of 2022, Glenview Capital raised its stakes in Encompass Health Corporation (NYSE:EHC) by 73%, bringing them to $91.41 million. The investment covers 1.85% of the fund’s 13F portfolio.

On June 21, Truist analyst David MacDonald lowered his price target on Encompass Health Corporation (NYSE:EHC) to $75 from $85 but reiterated a Buy rating on the shares.

Insider Monkey found 48 hedge funds bullish on Encompass Health Companies (NYSE:EHC) at the close of Q1 2022. These funds held collective stakes worth $1.14 billion in the company, up from $711.57 million in the previous quarter with 40 positions. The hedge fund sentiment for the stock is positive.

Here is what Heartland Advisors had to say about Encompass Health Companies (NYSE:EHC) in its fourth-quarter 2021 investor letter:

“COVID complications. Shares of many Health Care companies lagged as the continuing threat of COVID-19 dampened demand for elective medical procedures and health care providers struggled to maintain adequate staffing in the face of burnout and resistance to vaccine mandates. The Strategy’s holdings in the sector trailed the benchmark average, and the group contained a key detractor, Encompass Health Corporation (EHC).

Encompass provides inpatient rehabilitation services as well as home-based health and hospice care. Both businesses enjoy a competitive advantage over many of their peers and, we believe, are well positioned to grow organically, and acquire smaller competitors that could further economies of scale.

A labor shortage has taken a toll on sales and profit margins at Encompass as the company struggles to fill positions in a challenging environment for nursing wages and availability. Revenues have also been hurt by a slowdown in elective surgeries performed, which results in a smaller pool of patients in need of rehabilitation services.

When we took a stake in Encompass late in the summer of 2020, we recognized that COVID-related headwinds could endure longer than anticipated. However, the team believes the current challenges will eventually fade as enhanced nurse recruiting outreach helps mitigate staffing pressures while COVID-19 containment and treatment efforts gain traction. With shares producing an 8% free cash flow yield and trading at just 9x 2022 enterprise value/earnings before interest, taxes, depreciation, and amortization, we believe our patience will be rewarded.”

7. Centene Corporation (NYSE:CNC)

Glenview Capital’s Stake Value: $92,055,000

Percentage of Glenview Capital’s 13F Portfolio: 1.86%

Number of Hedge Fund Holders: 60

Centene Corporation (NYSE:CNC) operates as a multi-national healthcare company that provides programs and services to under-insured and uninsured individuals in the United States. On June 17, Centene Corporation (NYSE:CNC) raised its diluted EPS guidance, for fiscal year 2022, by $0.05, bringing its new forecasts to range between $5.55 and $5.70. The company also raised its fiscal year 2022 premium and service revenue guidance to a range between $134.3 billion and $136.3 billion. Centene Corporation (NYSE:CNC) also reported that its board of directors has authorized a $3 billion share repurchase program.

Analysts are bullish on Centene Corporation (NYSE:CNC) and see an upside to the stock. On June 21, Credit Suisse analyst A.J. Rice raised his price target on Centene Corporation (NYSE:CNC) to $88 from $86 and also upgraded the stock to Outperform from Neutral. On June 22, Deutsche Bank analyst George Hill raised his price target on Centene Corporation (NYSE:CNC) to $91 from $88 and reiterated a Buy rating on the shares.

As of March 31, Larry Robbins’ hedge fund has $92.05 million invested in Centene Corporation (NYSE:CNC). The investment covers 1.86% of Glenview Capital’s 13F portfolio.

Centene Corporation (NYSE:CNC) was spotted on 60 investment portfolios at the end of Q1 2022. The total stakes of these funds in the company were valued at $2.59 billion, down from $2.60 billion a quarter ago with 53 positions.

Other healthcare stocks billionaire Larry Robbins is bullish on include McKesson Corporation (NYSE:MCK), Bausch Health Companies (NYSE:BHC), and Cigna Corporation (NYSE:CI).

6. AmerisourceBergen Corporation (NYSE:ABC)

Glenview Capital’s Stake Value: $116,442,000

Percentage of Glenview Capital’s 13F Portfolio: 2.35%

Number of Hedge Fund Holders: 37

AmerisourceBergen Corporation (NYSE:ABC) sources and distributes pharmaceutical products in the United States and internationally. On May 4, the company released earnings for the second quarter of fiscal year 2022. AmerisourceBergen Corporation (NYSE:ABC) registered an EPS of $3.22 and beat expectations by $0.30. Moreover, the company’s revenue for the quarter came in at $57.72 billion, up 17.43% year over year, and ahead of expectations by $464.03 million.

On June 1, AmerisourceBergen Corporation (NYSE:ABC) announced that its board of directors has authorized a $1 billion share-buyback program of the company’s outstanding shares of common stock.

Analysts are bullish on AmerisourceBergen Corporation (NYSE:ABC). On June 7, Deutsche Bank analyst George Hill raised his price target on AmerisourceBergen Corporation (NYSE:ABC) to $178 from $167 and upgraded the stock to Buy from Hold. On June 13, UBS analyst Kevin Caliendo raised his price target on AmerisourceBergen Corporation (NYSE:ABC) to $174 from $144 and reiterated a Buy rating on the shares.

As of March 31, Glenview Capital’s stake in AmerisourceBergen Corporation (NYSE:ABC) is valued at $116.44 million. Larry Robbins’ hedge fund is the largest shareholder in the company and the investment covers 2.35% of Glenview Capital’s 13F portfolio.

At the close of Q1 2022, 37 hedge funds disclosed ownership of stakes in AmerisourceBergen Corporation (NYSE:ABC). These funds held collective stakes of $766.22 million in the company, down from $1.09 billion in Q4 2021 with 43 positions.

Heartland Advisors mentioned AmerisourceBergen Corporation (NYSE:ABC) in its “Heartland Mid Cap Value Fund” third-quarter 2021 investor letter. Here is what the firm said:

“The ABCs of quality.AmerisourceBergen Corp. (ABC), a leading national pharmaceutical distributor, provides an example of our approach. The company has been quietly bolstering its business model during the past few years to include animal health products for the European market and an expanded line of higher-margin, value-added services that reach beyond drug distribution. During these efforts, valuations for the company have been under pressure due to liability issues stemming from opioid litigation as well as concerns about increased scrutiny of drug prices by politicians.

Our team has been following these developments and believes the strides management has made on the business side are not being fully recognized by the market. As more clarity has emerged related to opioid litigation, we’ve increased the portfolio’s stake in AmerisourceBergen and believe the investment provides the portfolio with additional exposure to a high-quality business that is well positioned to grow despite operating in a mature industry.”

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