In mid July, Fisher Asset Management, the asset management firm run by billionaire and Forbes columnist Ken Fisher, filed its 13F for the second quarter of 2013 with the SEC, disclosing many of its long equity positions as of the end of June. We track these filings in our database, using them to help us develop investment strategies (for example, we have found that the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year), but also like to review picks from individual managers as they come in and comb through them for interesting investment ideas. When we went through Fisher’s filing we noticed a number of healthcare stocks among its top picks, including its two largest single-stock holdings. Read on for our thoughts on the fund’s five largest holdings in the healthcare sector and compare these picks to those in previous filings.
The largest single-stock position by market value in Fisher’s portfolio was Johnson & Johnson (NYSE:JNJ). The large healthcare company is a common defensive pick, and while a rally year to date has reduced its dividend yield to 2.9% it does still offer a low beta at 0.4. Johnson & Johnson’s earnings have been down recently, resulting in trailing numbers that do not look too attractive compared to the current valuation, but Wall Street analysts expect performance to turn around with the result being a forward P/E of 16.
The fund owned almost 13 million shares of Sanofi SA (ADR) (NYSE:SNY) at the beginning of July, per the filing. Both revenue and earnings were down considerably in the first quarter of 2013 versus a year earlier, with profits falling by 45%. At a market capitalization of close to $140 billion, the diversified drug developer and manufacturer trades at only 12 times forward earnings estimates- though, as with Johnson & Johnson, that is because the sell-side is expecting Sanofi’s earnings per share to increase. Adjusted EPS has been well below consensus each of the last three quarters.
Fisher and his team kept their stake in Novo Nordisk A/S (ADR) (NYSE:NVO), a provider of diabetes drugs and other pharmaceuticals, about constant between April and June at 2.7 million shares. Markets are pricing Novo Nordisk for future growth with trailing and forward earnings multiples of 23 and 20 respectively. Going by recent reports there has in fact been some improvement in the company’s financials: in its last quarterly report revenue rose 13% compared to the first quarter of 2012, and with margins expanding as well net income growth came in at 28%.
As such Novo Nordisk might be worth taking a look at for investors with enough knowledge of healthcare to evaluate whether or not it has enough growth potential to continue its strong performance over the next several years. In value terms Pfizer Inc. (NYSE:PFE) does seem somewhat interesting as well, though it might be better to wait for further results to see if management can in fact improve the company’s efficiency enough to improve profits even given the stability of its business.
Disclosure: I own no shares of any stocks mentioned in this article.
