In this article, we will discuss the 5 healthcare stocks to buy now according to billionaire Larry Robbins. If you want to read the detailed analysis of Glenview Capital and Robbins’ investment philosophy, go directly to 10 Healthcare Stocks to Buy Now According to Billionaire Larry Robbins.
5. AmerisourceBergen Corporation (NYSE:ABC)
Glenview Capital’s Stake Value: $116.4 million
Percentage of Glenview Capital’s 13F Portfolio: 2.35%
Number of Hedge Fund Holders: 37
AmerisourceBergen Corporation (NYSE:ABC) is a US-based pharmaceutical company that provides drug distribution and consulting services to medical businesses. On July 20, Argus analyst David Toung set the firm’s price target to $170, up from $160 and maintained a Buy rating on its shares. The analyst believes that the company posted strong Q2 results and its recent acquisition of Alliance Healthcare is a significant growth prospect. He also upgraded his EPS consensus for the company from $10.85 to $10.95 for FY 2022.
AmerisourceBergen Corporation (NYSE:ABC) as of July 25 delivers a dividend yield of 1.28% with an annual dividend payout of $1.84. Moreover, the company has paid out dividends of $3 billion and repurchased $10 billion worth of stock in the last decade. The net cash flow generated in the same period summed up to $17.8 billion. In addition, the company announced another $1 billion repurchase program on June 1.
AmerisourceBergen Corporation (NYSE:ABC) posted solid FQ2 results in May with an EPS of $3.22, exceeding the analyst estimates of $2.92. The revenue of $57.72 billion also outperformed the forecasts by 0.81%. AmerisourceBergen Corporation (NYSE:ABC) covered 2.35% of Glenview Capital’s portfolio at the end of Q1 2022. The fund owned company shares worth $116.4 million.
Here is what Heartland Advisors had to say about AmerisourceBergen (NYSE:ABC) Corporation in its Q3 2021 investor letter:
“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.”
4. Baxter International Inc. (NYSE:BAX)
Glenview Capital’s Stake Value: $171.44 million
Percentage of Glenview Capital’s 13F Portfolio: 3.47%
Number of Hedge Fund Holders: 45
Founded as a manufacturer of intravenous therapy, Baxter International Inc. (NYSE:BAX) is a medical equipment company that focuses on therapy and products for acute and chronic medical conditions, including kidney diseases. As of Q1 2022, Baxter International Inc. (NYSE:BAX) was a part of 45 hedge funds’ portfolios. Generation Investment Management was the biggest shareholder of the company with 16.4 million shares worth $1.27 billion.
Stifel analyst Rick Wise maintained a Buy rating on Baxter International Inc. (NYSE:BAX)’s shares, with a price target of $75, down from $85. The analyst added that the price target revisions “do not represent any fundamental shift in our positive long-term thinking for the MedTech industry or the potential for broad-based growth reacceleration”.
According to the firm’s Q1 2022 13F filings, Glenview Capital owned 2.21 million shares of Baxter International Inc. (NYSE:BAX) worth $171.44 million, representing 3.47% of the fund’s portfolio.
Here is what Cooper Investors had to say about Baxter International Inc. (NYSE:BAX) in its Q3 2021 investor letter:
“During the quarter we exited our position in Baxter, having originally bought in 2017 as a Low Risk Turnaround with clear Stalwart attributes. In essence, the core businesses were highly durable, providing life sustaining or saving medical products such as IV medication or pumps and dialysis machines.
They had been mismanaged prior to the company spinning off its biopharmaceutical business in 2015 which had generated most of the Baxter’s operating profit. With a new CEO in Joe Almeida, who came with a successful track record leading another medical device company (Covidien) we identified three sources of value latency for the new standalone Baxter.
Firstly, optimising the cost structure. Baxter were successful here – they were able to effectively double operating margins from low single digits to mid-to-high teens over a relatively short four-year period. Secondly, accelerating sales growth through a more focused R&D effort. This is inherently more difficult than cost optimisation and on this front success has been muted with only moderate impact to revenues from new product introductions. Finally, capital deployment through Baxter’s significantly under-levered balance sheet. Several smaller bolt-on acquisitions were nicely complementary to the existing portfolio, but in early September the company announced the acquisition of Hil-Rom Holdings, a medical device company with leading positions in bed systems and patient monitoring. The deal is significant at US$12.5bn in size, and exhausts all balance sheet latency in one fell swoop.
Whilst it is “EPS accretive” we believe the high single digit ROIC management are targeting over five years is most reflective of the financial merits of the deal. Put another way, despite visions of providing digital and connected healthcare (think a Baxter IV pump combined with a Hil-Rom smart bed), ultimately the combined entity will likely remain a low-to-mid-single digit grower. Baxter look like they are getting bigger but not necessarily better.
This combination of uncertainty around the merits of the Hil-Rom acquisition and the underwhelming performance on the product development side of the business led us to conclude that the investment proposition today is less attractive relative to other opportunities.”
3. Bausch Health Companies (NYSE:BHC)
Glenview Capital’s Stake Value: $211.5 million
Percentage of Glenview Capital’s 13F Portfolio: 4.28%
Number of Hedge Fund Holders: 48
Bausch Health Companies (NYSE:BHC) is a Canadian pharmaceutical company, primarily focusing on skin diseases, gastrointestinal disorders, eye health, and neurology. The company has close to 20,000 employees.
Bausch Health Companies (NYSE:BHC) was a part of 48 hedge fund portfolios in the first quarter of 2022 with a combined stake value of $3.17 billion, compared to 53 portfolios with stakes worth $3.865 billion in the previous quarter. Bausch Health Companies (NYSE:BHC) covered 4.28% of Glenview Capital’s portfolio with 9.256 million shares worth $211.5 million.
On June 13, JPMorgan analyst Chris Schott initiated Bausch Health Companies (NYSE:BHC)’s coverage with an Overweight rating and a $12 price target. The analyst noted that the Xifaxan patent litigation and Bausch & Lomb separation pathway significantly affects the stock’s valuation.
2. Cigna Corporation (NYSE:CI)
Glenview Capital’s Stake Value: $382.417 million
Percentage of Glenview Capital’s 13F Portfolio: 7.74%
Number of Hedge Fund Holders: 63
Cigna Corporation (NYSE:CI) is a multinational company, primarily focusing on managed health care and insurance. As of Q1 2022, Glenview Capital had approximately 1.6 million shares of the company valued at $382.317 million, representing 7.74% of the firm’s portfolio. The fund had also increased its holding in the company by 44% compared to Q4 2021.
In its most recent guidance for FY 2022, Cigna Corporation (NYSE:CI) is expected to post an EPS of $22.6 with a total growth of at least 725,000 medical customers. Furthermore, from its Evernorth segment, the company is expecting income from operations of around $6.1 billion, and $3.95 billion from Cigna Healthcare.
On July 14, Truist analyst David MacDonald maintained a Buy rating on Cigna Corporation (NYSE:CI)’s shares and raised the price target from $310 to $330. On the same day, Jefferies analyst David Windley downgraded the company shares to Hold from Buy, calling it the most vulnerable MCO to an economic downturn. Windley also reduced his price target to $271 from $330.
Here is what Davis Opportunity Fund had to say about Cigna Corporation (NYSE:CI) in its Q4 2021 investor letter:
“Healthcare is included in the portfolio both for company-specific reasons, as well as big picture trends. At the company level, we hold select companies in pharmaceuticals, healthcare services and health insurance at attractive valuations. This is at a time when the average age of the U.S. population is fast approaching 40, older than Asia-Pacific and a little younger than the aged populations of Europe and Japan. The number of seniors in the U.S.—i.e., 65 years or older— now surpasses 54 million, or about 15% of the population. Seniors, on average, take a much greater number of medications and account for a large and disproportionate share of healthcare spending, and we expect that trend to continue due to both raw demographics and a proliferation in the number of available treatments and services available now, the latter being driven by innovation and investment in the healthcare industry. Representative holdings in the Fund include Cigna, United Health Group, Viatris and Quest Diagnostics.”
1. Tenet Healthcare Corporation (NYSE:THC)
Glenview Capital’s Stake Value: $548.51 million
Percentage of Glenview Capital’s 13F Portfolio: 11.1%
Number of Hedge Fund Holders: 55
Tenet Healthcare Corporation (NYSE:THC) is a Texas-based health care services company and the top healthcare stock pick of Glenview Capital, covering 11.1% of its portfolio, with shares worth $548.51 million as of Q1 2022. As of the first quarter of 2022, 55 hedge funds were bullish on Tenet Healthcare Corporation (NYSE:THC), compared to 49 hedge funds in Q4 2021.
Tenet Healthcare Corporation (NYSE:THC) exceeded its Q2 earnings estimates by a staggering 88.67%. The company posted an EPS of $1.50 compared to the $0.80 consensus. The company lagged in revenue estimates after generating $4.64 billion, compared to the estimates of $4.78 billion. In addition, the company reported cash and cash equivalents of $1.4 billion, which were 42.9% below the previous year.
On July 7, Deutsche Bank analyst Pito Chickering maintained a Buy rating on Tenet Healthcare Corporation (NYSE:THC)’s shares and lowered the price target to $90 from $110.
Here is what Oakmark Funds had to say about Tenet Healthcare Corporation in its Q3 2021 investor letter:
“Tenet may be best known as the second-largest public hospital chain in the U.S., but its largest business is outpatient acute care centers. In early 2020, investors fled the healthcare industry because of the great uncertainty that the pandemic presented. The early days of the pandemic were very hard on the hospital industry especially, but as the Covid-19 surge peaked and diminished, hospitals were able to schedule elective procedures and engage in profitable activities.”
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