Insider Monkey strives to always keep investors updated on diverse stocks across different industries. Now that the 13F filings are in for the reporting period of March 31, we’ve been able to analyze the data and produce dozens of reports on the activity and trends among the best investors in the world. The healthcare sector is a popular one among investors at the moment given its sterling returns in recent years, including annualized returns of 27.08% over the past three years, while the S&P 500 returned 17.4% during that period. Needless to say, many hedge fund billionaires are heavily invested in the sector themselves, with Novus reporting that hedge funds (excluding quant-based funds) now have $289.67 billion invested in the sector and have gone from underweight to overweight over the course of the past year. In this article, we’ll take a look at the three most popular healthcare stocks among the billionaires in our database, which are Actavis plc (NYSE:ACT), Valeant Pharmaceuticals Intl Inc (NYSE:VRX) and Pfizer Inc. (NYSE:PFE).
pio3 / Shutterstock.com
Why are we interested in the 13F filings of a select group of hedge funds? We use these filings to determine the top 15 small-cap stocks held by these elite funds based on 16 years of research that showed their top small-cap picks are much more profitable than both their large-cap stocks and the broader market as a whole. These small-cap stocks beat the S&P 500 Total Return Index by an average of nearly one percentage point per month in our backtests, which were conducted over the period of 1999 to 2012. Moreover, since the beginning of forward testing from August 2012, the strategy worked just as our research predicted, outperforming the market every year and returning 144% over the last 32 months, which is more than 84 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).
The kind of growth and popularity that Actavis PLC (NYSE:ACT) has registered is overwhelming and that’s reflected in the amount of billionaires piling onto the stock. 26 billionaires had positions in Actavis on March 31, making it the most popular stock overall among billionaires and a staggering 44% higher than the next-most popular overall stock, which was Citigroup Inc (NYSE:C) with 18. Actavis’ CEO, Brent Saunders, is respected for his excellent management skills, while Actavis PLC (NYSE:ACT) also became particularly attractive after it acquired Allergan for $67 billion, the deal being completed in the first quarter. While the $10.52 billion that billionaires had invested in Actavis PLC (NYSE:ACT) was not their highest total overall (thanks primarily to several massive positions in other companies by Warren Buffett), it did stand as a big increase from the $6.20 billion they had invested in the company at the end of 2014.
Follow Warren Buffett's Berkshire Hathaway
Actavis’ 2014 performance beat analysts’ estimates and the company has continued to do the same in 2015, with profits for the first quarter of the year coming in at $4.30 per share, easily besting analysts’ forecast of $3.92. Andreas Halvorsen, Dan Loeb, and Barry Rosenstein are just a few of the billionaires with large positions in Actavis, while Stephen Mandel was one of the billionaires to open a new position in the stock during the first quarter.
Over the past five years or so, the shares of Valeant Pharmaceuticals Intl Inc (NYSE:VRX) has risen by more than 15 times, helping many wealthy investors become even wealthier in the process. Among the billionaires we track at Insider Monkey, 13 of them had positions in Valeant on March 31, half the total as were invested in Actavis, though an increase from 10 billionaire investors at the end of 2014. Nonetheless, the billionaires actually had more capital invested in Valeant, $11.70 billion in total, than they did in Actavis, which was also a huge increase from the $3.85 billion invested in the stock at the end of 2014. Two large positions by billionaires Bill Ackman (a new position) and Jeffrey Ubben contributed a large chunk of that investment, with each holding a position of nearly 20 million shares valued at nearly $4 billion.
Analysts aren’t quite as bullish on Valeant Pharmaceuticals Intl Inc (NYSE:VRX) as investors are, with Morningstar giving the stock a “BB” rating, while Deutsche Bank raised the stock’s price target to $207 from $200, which still left it well below the current share price of over $236. According to Valeant CEO Michael Pearson, Valeant is expected to surpass the $1 billion mark in revenue from the Asian market, with every unit expected to realize a growth of 10% annually. The company released guidance of $2.40-$2.50 in earnings per share for the second quarter of 2015, which falls within the Thompson Reuters consensus estimate of $2.43. As for the financial year 2015, the company released guidance of $10.90-$11.20 in earnings per share.
Pfizer Inc. (NYSE:PFE) has also experienced strong growth over the years, with its shares rising to $35 in 2015 from $11 in 2009. The company has made numerous acquisitions that have strengthened its returns, and it’s projected to perform even better in the second quarter of 2015. 13 billionaires also hold positions in Pfizer as of March 31, though their aggregate investment totals just $2.29 billion. Nonetheless, those figures are a solid increase from the 10 billionaires holding $1.56 billion worth of its stock at the end of 2014. The stock is expected to perform decently within the next twelve months, having an average price target of $37.46, showing an upside potential of about 10%. Some of the billionaire investors of Pfizer Inc. (NYSE:PFE) include Ken Fisher and Israel Englander.
Disclosure: None
