In this article, we discuss the top 5 stock picks from the healthcare sector of billionaire Larry Robbins’ hedge fund Glenview Capital Management. If you are interested in knowing about the firm’s beginnings, its recent performance and details about its current portfolio, please also check out 10 Best Healthcare Stocks to Buy According to Billionaire Larry Robbins.
5. Encompass Health Corporation (NYSE:EHC)
Glenview Capital Management’s Stake Value: $77,027,000
Percentage of Glenview Capital Management’s 13F Portfolio: 1.92%
Number of Hedge Fund Holders: 34
Encompass Health Corporation (NYSE:EHC) saw a tremendous rise in its popularity among smart money investors beginning in mid-2019. Among the hedge funds tracked by Insider Monkey, the number of funds that disclosed a stake in Encompass Health Corporation (NYSE:EHC) more than doubled to 48 at the end of Q1 2022 from just 23 funds at the end of Q3 2019. However, during the second quarter, several funds sold their entire stake in this Birmingham, Alabama-based healthcare services provider, and that number fell to 34. Funds that disposed of their entire holdings in Q2 included Chuck Royce’s Royce & Associates and Peter Muller’s PDT Partners.
Encompass Health Corporation (NYSE:EHC) has consistently paid its shareholders a quarterly dividend for the past 8 years. In addition, it recently increased its quarterly dividend by 27.2% to $0.28 per share, which translates into a respectable annual dividend yield of 2.3% based on the stock’s last closing price. On September 21, analysts at Credit Suisse Group reiterated their ‘Outperform’ rating on the stock but lowered their price target to $62 from $63, which still represents a potential upside of close to 27% from the price at which the stock currently trades.
4. Centene Corporation (NYSE:CNC)
Glenview Capital Management’s Stake Value: $90,822,000
Percentage of Glenview Capital Management’s 13F Portfolio: 2.27%
Number of Hedge Fund Holders: 58
Centene Corporation (NYSE:CNC) has been one of the few large-cap stocks from the healthcare sector that has shown resilience amid a drastic pullback by the broader market this year. Although the stock is down marginally by 2% year-to-date, it still boasts a gain of over 28% over the previous 12 months. However, despite the resilience and outperformance of the stock, Glenview Capital Management has been reducing its stake in the company over the past few quarters. The fund disclosed a stake in the company for the first time in its 13F filing for the second quarter of 2021. It upped its stake in the next quarter by 5% but has brought it down by 36%, 19% and 2% consecutively in the last three quarters.
Recently, Centene Corporation (NYSE:CNC) was amongst the frontrunners expected to win contracts for the delivery of commercial managed care plans in California starting in 2024. Although the company managed to win contracts for some counties, analysts at Wells Fargo & Company were not impressed. On August 26, they released a note downgrading the stock to ‘Equal Weight’ from ‘Overweight’ and also lowered their price target on it to $99 from $103. In the research note, the analysts emphasized:
“…the awards represent pretty close to a worst-case outcome for CNC with the crown jewel of the CA Medicaid program (Los Angeles county) set to transition from CNC to MOH….Conversely, for MOH the awards represent a best-case outcome and are actually more meaningful for MOH than CNC given the significant difference in revenue.”
3. Baxter International Inc. (NYSE:BAX)
Glenview Capital Management’s Stake Value: $139,573,000
Percentage of Lee Munder Capital Group’s 13F Portfolio: 3.49%
Number of Hedge Fund Holders: 37
Founded in 1931, Baxter International Inc. (NYSE:BAX) is one of the world’s oldest and largest healthcare product providers, with an array of products across different medical categories. Since the start of 2022, Baxter International Inc.’s (NYSE:BAX) stock has lost more than one-third of its value amid a slew of bad news surrounding the company, including product recalls, disappointing quarterly numbers and guidance, and supply-chain disruptions.
Late last month Baxter International Inc. (NYSE:BAX) announced that the United States Food and Drug Administration (FDA) had granted 501k clearance for its Novum IQ syringe infusion pump (SYR) with Dose IQ Safety Software. On September 13, Bloomberg reported that Baxter International Inc. (NYSE:BAX) is considering the sale of its two renal care business units. The combined value of these two units is estimated to be under $1 billion, and private equity firms could show interest in acquiring them.
2. McKesson Corporation (NYSE:MCK)
Glenview Capital Management’s Stake Value: $236,776,000
Percentage of Glenview Capital Management’s 13F Portfolio: 5.92%
Number of Hedge Fund Holders: 47
Of late, Glenview Capital Management has been on a profit booking spree of its McKesson Corporation’s (NYSE:MCK) holdings. The fund has reduced its stake in the company by 11%, 39% and 22%, respectively, in the previous three quarters. One of the main reasons the fund has been lowering its stake, which it first disclosed initiating during the last quarter of 2016, could be the consistent uptrend displayed by McKesson Corporation’s (NYSE:MCK) stock during the previous 12 months. Bucking the broader market trend, shares of the Irving, Texas-based healthcare distributor are trading up by 78% year-over-year and 40% year-to-date.
On September 19, McKesson Corporation (NYSE:MCK) announced that it had agreed to acquire Rx Savings Solutions – a prescription price transparency and benefit insight company that offers affordability and adherence solutions to health plans and employers – for up to $875 million. According to the terms of the deal, McKesson Corporation (NYSE:MCK) will make an upfront payment of $600 million to the existing shareholders of Rx Savings Solutions, while it will provide a maximum of $275 million of consideration contingent upon the latter’s financial performance through 2025.
1. Tenet Healthcare Corp (NYSE:THC)
Glenview Capital Management’s Stake Value: $358,757,000
Percentage of Glenview Capital Management’s 13F Portfolio: 8.97%
Number of Hedge Fund Holders: 61
Tenet Healthcare Corp (NYSE:THC) remained Glenview Capital Management’s top pick from the healthcare sector at the end of Q2 though it got relegated to the second spot overall in the fund’s 13F portfolio in that period. This demotion in the overall portfolio happened even though Glenview Capital Management upped its stake in the company by 7% to 6.82 million shares and can be mostly attributed to the 40% decline in Tenet Healthcare Corp’s (NYSE:THC) stock during the second quarter.
The popularity of Tenet Healthcare Corp (NYSE:THC) among smart money investors has shot through the roof since mid-2020. From just 29 funds, among those tracked by Insider Monkey, disclosing a stake in the company at the end of the second quarter of 2020, the number has more than doubled to 61 two years later. Funds covered by us that initiated a stake in Tenet Healthcare Corp (NYSE:THC) during the second quarter included Paul Tudor Jones’ Tudor Investment Corp, Michael Castor’s Sio Capital, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. 13 of the 15 analysts on Wall Street who actively monitor the stock currently have a ‘Buy’ or equivalent rating on it. On August 24, SVB Leerink’s analyst, Whit Mayo, reiterated his ‘Outperform’ rating on the stock while boosting his price target to $93 from $88, representing a potential upside of close to 67% from the stock’s last closing price.
You can also look at 8 Best Stocks to Buy According to Billionaire Nelson Peltz and 7 Best Stocks to Buy According to Activist JANA Partners
