In this article we’ll examine why Billionaire Jeffrey Talpins Just Fled From These 5 Healthcare Stocks. For our methodology and a more comprehensive list of stocks the money manager has been selling, please see Billionaire Jeffrey Talpins Just Fled From These 10 Healthcare Stocks.
5. Laboratory Corporation of America Holdings (NYSE:LH)
Former Value of Element Capital Management‘s 13F Position: $17.4 million
Number of Hedge Fund Shareholders: 49
Jeffrey Talpins’ Element Capital Management was one of many hedge funds to unload their positions in Laboratory Corporation of America Holdings (NYSE:LH) during Q1, as the number of funds long LH fell by 21% during the quarter. Bruce Kovner’s Caxton Associates and Zach Schreiber’s Point State Capital were among the other funds offloading their LH positions in Q1.
Laboratory Corporation of America Holdings (NYSE:LH) is another Covid testing company that Jeffrey Talpins unloaded during Q1. The company missed revenue estimates in Q1 and saw its adjusted operating income slump 34.2% compared to Q1 2021. Margins also contracted quite a bit, as gross margin declined by 681 basis points to 31.6% and adjusted operating margin fared even worse. On the plus side, LabCorp has a $15.2 billion backlog as of March 31, nearly a third of which the company expects to show up as revenue over the next year.
The Vltava Fund has been impressed by the growth and profitability of Laboratory Corporation of America Holdings (NYSE:LH)’s Covid-19 PCR testing, while admitting in its Q4 2021 investor letter that the number of tests the company performs is likely to drop substantially in the near future:
“Three companies that most pleasantly surprised us by their profitability last year (including) LabCorp. LabCorp is earning a lot on COVID-19 PCR tests. While 2 years ago this business did not exist at all, today it is driving the company’s huge growth in profitability. Although we expect – and hope – that the number of tests performed will drop significantly soon (and by the way, LabCorp is able to do 250,000 of them daily), LabCorp’s profitability over the past 2 years has very pleasantly surprised us.”
4. Thermo Fisher Scientific Inc. (NYSE:TMO)
Former Value of Element Capital Management‘s 13F Position: $34.6 million
Number of Hedge Fund Shareholders: 101
More hedge funds have taken long positions in Thermo Fisher Scientific Inc. (NYSE:TMO) than ever before following four straight quarters of rising hedge fund ownership of the stock. Talpins’ fund was on that buying bandwagon in Q4, taking a new position of 51,823 shares in the life sciences company. The fund hopped off the bandwagon in Q1 however, unloading its entire stake in the company.
While Thermo Fisher Scientific Inc. (NYSE:TMO)’s Covid-related revenue also fell heavily during Q1, slumping by over 30% to $1.7 billion, the company was able to overcome that and grow its overall sales by nearly $2 billion to $11.8 billion. PPD, which Thermo Fisher acquired in December, contributed heavily to those gains, boosting revenue by $1.7 billion in the first quarter. The laboratory supplies and clinical research company appears to be well positioned to capture more of the growing healthcare market, which is projected to grow by more than 7% annually through 2027.
The ClearBridge Investments Sustainability Leaders Strategy loves the fertility benefit management services that Thermo Fisher Scientific Inc. (NYSE:TMO) provides to clients, saying this about the company in its Q4 2021 investor letter:
“Improving health remains a key impact theme for the portfolio, and over the past year or so we have increased our exposure to the health care sector, through the addition of Thermo Fisher Scientific, a leading health care tools company, a leading provider of fertility benefit management services to self-insured employers that offers a rare win-win-win for employers, employees, health systems, and doctors, with clear savings and quality improvements.”
3. Moderna, Inc. (NASDAQ:MRNA)
Former Value of Element Capital Management‘s 13F Position: $38.5 million
Number of Hedge Fund Shareholders: 41
Element Capital also built a new stake in Moderna, Inc. (NASDAQ:MRNA) during the fourth quarter, perhaps eyeing one of the 5 Stocks to Buy Before the Next Pandemic as an intriguing buy in the midst of the omicron variant’s rapid spread around the world. By Q1 however, the fund had unloaded its entire stake in the vaccine developer and biotech firm.
Moderna, Inc. (NASDAQ:MRNA) is far from done with Covid, as the company’s booster shots for the omicron variants appear to be poised for action come this fall after the FDA approved their use earlier this month. Those variants have proven to be even more transmissible than omicron itself, and the Biden administration has warned of yet another wave of Covid descending upon us later this year.
The latest news comes just two weeks after Moderna, Inc. (NASDAQ:MRNA)’s vaccine was also approved for use in children as young as six months old, opening another pathway to increased deliveries of vaccine doses. Moderna previously projected that its mRNA vaccine would generate $19 billion in sales this year, a figure that could rise substantially should the omicron variants gain a foothold.
2. BioNTech SE (NASDAQ:BNTX)
Former Value of Element Capital Management‘s 13F Position: $40.1 million
Number of Hedge Fund Shareholders: 29
Element Capital was also loading up on another major player in the vaccine space during Q4, BioNTech SE (NASDAQ:BNTX), which has a strong vaccine collaboration in place with Pfizer Inc. (NYSE:PFE), which had ranked as Element Capital’s top stock pick at the end of last year. The fund unloaded nearly its entire Pfizer stake during Q1, and did sell off its entire BNTX position during the quarter as it looks to target other investment areas.
BioNTech SE (NASDAQ:BNTX) has been the beneficiary of the some of the same positive news as Moderna, with the U.S government recently ordering another 105 million doses of the company’s Comirnaty vaccine, with an option to purchase a further 195 million doses. Pfizer estimated the companies’ co-developed vaccine would generate $32 billion in sales this year.
BioNTech SE (NASDAQ:BNTX) also has a booster candidate that’s currently in phase 2/3 testing which has shown strong efficacy against several omicron variants, including the most dominant strains. A resurgence of Covid would certainly be a short-term boon for the company, which pulled in $22 billion in revenue last year, a figure that analysts predict will crash to just $3.1 billion by 2026.
1. Danaher Corporation (NYSE:DHR)
Former Value of Element Capital Management‘s 13F Position: $47.2 million
Number of Hedge Fund Shareholders: 87
Topping the list of healthcare stocks that Jeffrey Talpins was fleeing from in Q1 is Danaher Corporation (NYSE:DHR). Talpins’ fund bought 143,552 shares of DHR during Q4, ranking the stock as its 11th-largest 13F position. It sold out of the stake entirely during the first quarter. Danaher has steadily grown in popularity among hedge funds over the last three-plus years, with smart money ownership of DHR rising by 71% during that time.
Danaher was recently upgraded to ‘Outperform’ from ‘Sector Perform’ by RBC Capital analyst Deane Dray, who believes the market is overreacting to the tough Covid comps the company will face this year. The analyst has a $310 price target on the stock, up from $299.
While Danaher Corporation (NYSE:DHR)’s slowing Covid testing sales growth is weighing on the company’s overall growth, its core businesses are performing quite well, particularly when it comes to the company’s monoclonal antibodies pipeline, which has grown by 50% over the last five years.
The Cooper Investors Global Equities Fund is confident that Danaher Corporation (NYSE:DHR) will rebound from its Q1 weakness, having this to say about the company in its Q1 2022 investor letter:
“This combination of attributes was not in favour during a quarter where the market rotated into larger, more traditional index heavyweights that, while growing more slowly and generating lower returns on capital, typically trade on lower headline multiples. In Healthcare for example, we saw portfolio holdings Danaher fall 10-15% in the quarter. Given the relative business quality and growth prospects for a life sciences capital allocator champion like Danaher versus a large diversified pharma company, we think this period of underperformance is likely more a blip than a trend.”
For more on the latest trades made by some of the biggest hedge fund managers in the world, check out 10 Stocks to Buy According to BlueSpruce Investments and 10 Best Staffing Company Stocks To Invest In.
Disclosure: None.
