In this article, we discuss the top 10 pharmaceutical stocks to buy based on billionaire Ken Griffin’s portfolio. If you want to skip our detailed analysis of the pharmaceutical industry, go directly to 5 Pharmaceutical Stocks to Buy Based on Billionaire Ken Griffin’s Portfolio.
The pharmaceutical industry was projected to grow to $1250.24 billion in 2021 from $1228.45 billion in 2020, at a CAGR of 1.8%. As the COVID-19 pandemic ravaged the world, the big pharmaceutical companies rallied together to create vaccines, pills, and equipment. Companies like Pfizer Inc. (NYSE:PFE), Johnson & Johnson (NYSE:JNJ), Moderna, Inc. (NASDAQ:MRNA), and AstraZeneca PLC (NASDAQ:AZN) rose to the challenge and created COVID-19 vaccines in record time.
In 2020, due to the nationwide lockdowns, essential visits to the doctors were also banned, and this resulted in a 21% decline in patient visits. Visits dropped significantly for oncology, gastroenterology, and dermatology checkups. However, the use of telehealth for primary care increased to 35 million visits, peaking at 18% in April 2020.
Ken Griffin is an American entrepreneur, investor, and billionaire hedge fund manager. He is the founder, CEO, and CIO of Citadel Investment Group, which is a multinational hedge fund where Griffin owns 85% of the securities. 11.73% of billionaire Ken Griffin’s Q3 portfolio consists of healthcare stocks, and the rest of the portfolio is concentrated in the information technology, industrials, finance, consumer discretionary, and communications stocks.
The most notable healthcare stocks in Ken Griffin’s Citadel Investment Group’s Q3 portfolio include Pfizer Inc. (NYSE:PFE), McKesson Corporation (NYSE:MCK), Merck & Co., Inc. (NYSE:MRK), and Teladoc Health, Inc. (NYSE:TDOC), among others discussed in detail below.
Ken Griffin of Citadel Investment Group
Our Methodology
We used Ken Griffin’s portfolio for the third quarter to select his top 10 pharmaceutical stocks, ranking the companies according to the billionaire’s stake value in each holding.
We have also mentioned the Q3 earnings, analyst ratings, and the hedge fund sentiment around each stock for additional context on every company.
Pharmaceutical Stocks to Buy Based on Billionaire Ken Griffin’s Portfolio
10. Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE)
Citadel Investment Group’s Stake Value: $133,765,000
Percentage of Citadel Investment Group’s 13F Portfolio: 0.02%
Number of Hedge Fund Holders: 24
Billionaire Ken Griffin holds 1.48 million shares in Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) as of September 2021, worth $133.76 million, representing 0.02% of his total Q3 investments. Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) is a California-based biopharmaceutical company that is engaged in extensive R&D for medical products and treatments concerning extremely rare genetic diseases.
Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE), on November 2, announced earnings for the third quarter. EPS in the period came in at -$1.45, missing estimates by -$0.36. The Q3 revenue equaled $81.65 million, beating estimates by $103,090.
On November 3, Citi analyst Yigal Nochomovitz stated that Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) is “trading at a significant discount to fair value”, with several emerging catalysts that will help the faltering stock. The analyst kept a Buy rating and a $150 price target on Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) shares.
Alkeon Capital Management is the largest Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) stakeholder from the third quarter, holding 2.3 million shares valued at $208.17 million. Overall, 24 hedge funds were bullish on Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) in Q3, with total stakes amounting to $638.6 million.
In addition to Pfizer Inc. (NYSE:PFE), McKesson Corporation (NYSE:MCK), Merck & Co., Inc. (NYSE:MRK), and Teladoc Health, Inc. (NYSE:TDOC), Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) is a notable pharmaceutical stock from billionaire Ken Griffin’s Q3 portfolio.
9. McKesson Corporation (NYSE:MCK)
Citadel Investment Group’s Stake Value: $137,805,000
Percentage of Citadel Investment Group’s 13F Portfolio: 0.02%
Number of Hedge Fund Holders: 51
McKesson Corporation (NYSE:MCK) is a Texas-based pharmaceutical company specializing in health information technology, medical supplies, and care management equipment. Ken Griffin, via Citadel Investment Group, owns 691,169 shares of McKesson Corporation (NYSE:MCK), valued at $137.80 million, representing 0.02% of the hedge fund’s total investments.
Cowen analyst Charles Ryhee on December 6 raised the price target on McKesson Corporation (NYSE:MCK) to $300 from $268 and kept an Outperform rating on the shares, citing underlying growth across main business segments, further upside from vaccine distribution, and demand for boosters and pediatric shots accelerated by the COVID-19 Omicron variant.
On November 1, McKesson Corporation (NYSE:MCK) announced earnings for Q3, posting an EPS of $6.15, beating estimates by $1.49. The quarterly revenue equaled $66.58 billion, gaining 9.49% year-over-year, outperforming estimates by $3.36 billion.
Pzena Investment Management holds a leading stake in McKesson Corporation (NYSE:MCK) in the third quarter, valued at almost $594 million. Overall, 51 hedge funds in the Q3 database of Insider Monkey reported owning stakes in McKesson Corporation (NYSE:MCK), with total stakes worth $2.27 billion.
Here is what Broyhill Asset Management has to say about McKesson Corporation (NYSE:MCK) in its Q2 2021 investor letter:
“Analysts continued ratcheting up full-year earnings estimates for McKesson (MCK) driving the stock steadily higher. Despite strong year-to-date gains, shares of the company are trading at lower valuations today than before the pandemic as earnings estimates have outpaced their rising stock prices… The story is similar at McKesson where vaccine distribution should continue to provide upside to consensus estimates. Although investors have been hesitant to give the company full credit for today’s “temporary” profits, we think these “temporary” COVID-tailwinds may turn out to be not so temporary. If we are wrong, we believe the downside is limited given recent activist involvement and management’s decision to pursue a strategic review to capture the full value of the company’s drug development business.”
8. Teladoc Health, Inc. (NYSE:TDOC)
Citadel Investment Group’s Stake Value: $150,260,000
Percentage of Citadel Investment Group’s 13F Portfolio: 0.03%
Number of Hedge Fund Holders: 40
Teladoc Health, Inc. (NYSE:TDOC), a virtual healthcare company offering telemedicine services, medical opinions, AI and analytics, and telehealth devices, is one of the top pharmaceutical stocks to buy based on billionaire Ken Griffin’s portfolio. Griffin holds a $150.26 million position in Teladoc Health, Inc. (NYSE:TDOC) as of Q3 2021, increasing his stake in the company by 46%. The stock accounts for 0.03% of the total Q3 portfolio of Citadel Investment Group.
Teladoc Health, Inc. (NYSE:TDOC) reported earnings for the third quarter on October 27. EPS for the period totaled -$0.50, beating estimates by $0.12. The $521.66 million revenue jumped 80.26% from the prior year quarter, outperforming estimates by $4.87 million.
Baird analyst Vikram Kesavabhotla on December 2 lowered the price target on Teladoc Health, Inc. (NYSE:TDOC) to $110 from $125 and kept a Neutral rating on the shares, stating that he sees an attractive near-term opportunity heading into Q4 results based on the potential for positive execution during the Omicron headwinds.
Cathie Wood’s ARK Investment Management is the leading Teladoc Health, Inc. (NYSE:TDOC) stakeholder from the third quarter, holding 16.45 million shares worth over $2 billion. Overall, the Q3 database of 867 elite funds tracked by Insider Monkey reported that 40 hedge funds were bullish on Teladoc Health, Inc. (NYSE:TDOC), down from 43 funds in the prior quarter.
Here is what Luca Capital has to say about Teladoc Health, Inc. (NYSE:TDOC) in its Q3 2021 investor letter:
“As bullish as we are on the future of telemedicine though, we acquiesce that it can be difficult to build a durable moat. Although telemedicine is very scalable and an easy sell (everyone is a potential customer), the service itself is a commodity with little pricing power and low switching costs. However, scale is a significant advantage as a larger network of providers confers lower connection times and wider coverage. In addition, different areas of the country have varying access to care at any given time, but since regulations now allow providers to see patients across all states, we can better match doctors with patients under a national network, similar to “load balancing” in computing. Since Teladoc is international too, there also exists an opportunity to see patients across international borders. These are just a handful of reasons why we do not believe off-the-shelf consumer products like Zoom or Twilio will eventually replace the core telemedicine providers. They’re not integrated, not on-demand, limited to local physician supply, not accessible at the point-of-care via carts or other hospital equipment, and there’s nothing like Livongo to give the providers a continuous picture of patient health. Teladoc also allows white labelling, which enables health systems to take advantage of Teladoc’s additional provider supply while retaining the brand their patients have come to know and trust. However, while this incentivizes health systems to go with specialized platforms like Teladoc or Amwell, it’s making it more difficult for end-consumers to differentiate the major telemedicine providers at the product-level.”
7. HCA Healthcare, Inc. (NYSE:HCA)
Citadel Investment Group’s Stake Value: $174,007,000
Percentage of Citadel Investment Group’s 13F Portfolio: 0.03%
Number of Hedge Fund Holders: 72
HCA Healthcare, Inc. (NYSE:HCA) is a new arrival in Citadel’s portfolio. Griffin, via Citadel Investment Group, holds 716,903 shares in HCA Healthcare, Inc. (NYSE:HCA), worth $174 million, representing 0.03% of the fund’s total investments. HCA Healthcare, Inc. (NYSE:HCA) is a for-profit healthcare company that has been providing medical care to patients since its inception in 1968.
HCA Healthcare, Inc. (NYSE:HCA), on October 22, announced earnings for Q3. EPS in the quarter equaled $4.57, exceeding estimates by $0.56. The $15.28 billion quarterly revenue saw an increase of 14.76% year-over-year, beating estimates by $773.29 million.
Credit Suisse analyst A.J. Rice on October 25 raised the price target on HCA Healthcare, Inc. (NYSE:HCA) to $298 from $267 following the Q3 results. The analyst kept an Outperform rating on the shares.
Harris Associates holds a leading position in HCA Healthcare, Inc. (NYSE:HCA) in the third quarter, owning almost 8 million shares of the company worth $1.93 billion. Overall, 72 hedge funds monitored by Insider Monkey reported owning stakes in HCA Healthcare, Inc. (NYSE:HCA) in Q3, amounting to $3.30 billion.
Here is what First Eagle Investment Management has to say about HCA Healthcare, Inc. (NYSE:HCA) in its Q3 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.”
6. Laboratory Corporation of America Holdings (NYSE:LH)
Citadel Investment Group’s Stake Value: $176,880,000
Percentage of Citadel Investment Group’s 13F Portfolio: 0.03%
Number of Hedge Fund Holders: 58
Headquartered in North Carolina, Laboratory Corporation of America Holdings (NYSE:LH) operates a network of 36 major laboratories in the US, and manages the biggest clinical laboratory network in the world. Laboratory Corporation of America Holdings (NYSE:LH) is one of the best pharmaceutical stocks to buy based on Ken Griffin’s Q3 portfolio, with the billionaire increasing his stake in the company by 21%, holding 628,479 shares worth $176.88 million.
Of the 58 hedge funds that were bullish on Laboratory Corporation of America Holdings (NYSE:LH) in the third quarter, Gabriel Plotkin’s Melvin Capital Management is the largest stakeholder of the company, owning a $534.73 million position in the company.
Laboratory Corporation of America Holdings (NYSE:LH) announced Q3 earnings on October 28. EPS in the third quarter amounted to $6.82, outperforming estimates by $1.90. The $4.06 billion revenue gained 4.21% year-over-year, exceeding estimates by $427.23 million.
On October 19, Citi analyst Ralph Giacobbe opened a “Positive Catalyst Watch” Laboratory Corporation of America Holdings (NYSE:LH) ahead of the Q3 earnings reports, stating that continued strong cash flow and capital deployment “should support shares and allow the stock to retest highs.”
In addition to Pfizer Inc. (NYSE:PFE), McKesson Corporation (NYSE:MCK), Merck & Co., Inc. (NYSE:MRK), and Teladoc Health, Inc. (NYSE:TDOC), Laboratory Corporation of America Holdings (NYSE:LH) is a notable pharmaceutical stock from billionaire Ken Griffin’s Q3 portfolio.
Here is what Weitz Investment Management Hickory Fund has to say about Laboratory Corporation of America Holdings (NYSE:LH) in its Q3 2021 investor letter:
“Labcorp has also been a year-to-date contributor as the company’s traditional lab business continues to recover and as it becomes clear that COVID-related demand will remain elevated for an extended period.”
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Disclosure: None. 10 Pharmaceutical Stocks to Buy Based on Billionaire Ken Griffin’s Portfolio is originally published on Insider Monkey.
