Billionaire Larry Robbins’ Biggest Q2 Moves in Healthcare Stocks

Billionaire Larry Robbins‘ famed hedge fund Glenview Capital recently has submitted its 13F filing with SEC for the reporting period ended June 30, revealing a US equity portfolio worth $14.14 billion. The New York-based fund currently manages assets worth over $20 billion and was in the news earlier this year when, after a hiatus of more than two years, it again started taking fresh investments for its flagship Glenview Opportunity Fund.

Glenview’s latest 13F filing showed that the fund’s equity portfolio had a quarterly turnover of nearly 47% during the second quarter and its top-10 holdings amassed 58.6% of the value at the end of June. In the last few quarters, the fund has been extremely bullish on the healthcare sector and that sentiment remained intact as Glenview was entering the third quarter  with stocks from the healthcare sector accounting for 58% of its portfolio. Considering the conviction Glenview has on the healthcare sector, in this post, we will take a look at the five biggest moves the fund made in that space during the second quarter.

At Insider Monkey, we track around 750 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details).

#5 McKesson Corporation (NYSE:MCK)

During the second quarter, Glenview Capital sold its entire stake in McKesson Corporation (NYSE:MCK), which was its 27th largest holding a quarter earlier. McKesson Corporation (NYSE:MCK)’s stock has declined considerably since reaching its lifetime high above the $240 mark last year. However, it is currently trading down by only 7.5% year-to-date. The company pays a quarterly dividend of $0.28 per share, which translates into an annual dividend yield of 0.61%. On July 27, McKesson Corporation reported its results for the fiscal 2017 first quarter, declaring EPS of $3.50 on revenue of $49.73 billion versus analysts’ expectation of EPS of $3.33 on revenue of $50.32 billion. Earlier this month, analysts at Mizuho reiterated their ‘Neutral’ rating on the stock, but boosted their price target on it to $197 from $174. During the second quarter, the numbers of funds tracked by Insider Monkey long McKesson Corporation remained constant at 66, but the aggregate value of their holdings in it shot up by $290 million to $2.20 billion. Eli Cohen‘s Crescent Park Management was one of the hedge funds that upped its stake in the company during that time, by 19% to 145,068 shares.

#4 Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA)

– Shares Owned by Glenview Capital (as of June 30): 3.08 Million

– Value of Holding (as of June 30): 154.85 Million

A 6.12% drop in  its stock during the second quarter coupled with Glenview Capital reducing its stake in the company by 44% during the same period relegated Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) to the 25th spot in the fund’s portfolio at the end of June from the 16th spot at the end of March. Another billionaire investor who lowered his stake in the pharma giant during the second quarter was Andreas Halvorsen (Viking Global), by 16% to 27.73 million shares. So far, 2016 hasn’t turned out to be a good year for the Israeli drug giant as it has lost over 20% of its market cap despite making notable acquisitions. After announcing its $40.5 billion acquisition of rival Allergan’s generic business in January, the company revealed earlier this month that it will acquire Allergan’s Anda, Inc. (ANDN) distribution business for an additional $500 million. Though some analysts have raised concerns about the aggressive inorganic growth strategy Teva Pharmaceutical is following currently, most analysts think that it is the right approach for a company that is competing in a highly consolidated industry. On August 25, analysts at Credit Suisse Group AG reiterated their ‘Neutral’ rating on the stock while lowering their price target to $51.63 from $59. The company suffered a notable drop in its popularity among hedge funds covered by us during the April-June period with its ownership declining by 15 to 55 funds and the aggregate value of their holdings in it shrinking by $1.12 billion to $6.21 billion.

#3 IMS Health Holdings Inc (NYSE:IMS)

– Shares Owned by Glenview Capital (as of June 30): 6.76 Million

– Value of Holding (as of June 30): $171.41 Million

IMS Health Holdings Inc (NYSE:IMS) was a new entrant in Glenview Capital’s equity portfolio during the second quarter. Shares of the healthcare-focused IT company has registered solid gains in the last few months after it announced that it has agreed to merge with Quintiles Transnational Holdings (NYSE:Q) in an all stock-deal.  Owing largely to this recent rally, the stock is currently trading up almost 17% year-to-date. While investors of IMS Health Holdings Inc (NYSE:IMS) have applauded this merger, some analysts think that the merger won’t be of much help to the company because its growth remains weak and is balance sheet is highly leveraged. For its most recent quarter, IMS Health Holdings Inc reported EPS of $0.41 on revenue of $802 million, compared to EPS of $0.39 on revenue of $632 million it had reported for the same quarter last year. Though the number of investors covered by us that were long IMS Health Holdings Inc declined by two to 21 during the second quarter, the aggregate value of their holdings in the company during the same time shot up by $260 million to $892.5 million. Peter Adam Hochfelder‘s Brahman Capital was another hedge fund that initiated a stake in IMS Health Holdings during the second quarter, by purchasing 7.2 million shares of the company.

#2 Thermo Fisher Scientific Inc. (NYSE:TMO)

– Shares Owned by Glenview Capital (as of June 30): 2.86 Million

– Value of Holding (as of June 30): $422.33 Million

Moving on, Glenview Capital lowered its stake in Thermo Fisher Scientific Inc. (NYSE:TMO) by 20% during the second quarter. However, the popularity of Thermo Fisher Scientific among funds covered by Insider Monkey saw a significant rise during that time with its ownership rising by seven to 57 funds and the aggregate value of their holdings in it swelling by $351 million to $2.79 billion. The medical devices company has been one of the best large-cap stocks in the healthcare space since the last four years, delivering returns of over 200% during that time. Since Glenview Capital has held a stake in the company since 2006, it is quite possible that the fund’s decision to reduce its stake in the company was merely a profit booking exercise. While Thermo Fisher Scientific Inc. (NYSE:TMO)’s has recently seen a minor correction after making its lifetime earlier this month, most analysts believe that the stock will continue its upward trajectory going forward. The 19 leading analysts and research firms on Wall Street who track the stock currently have an average rating of ‘Buy’ and an average price target of $171.13, which represents a potential upside of around 11%. Richard Chilton‘s Chilton Investment Company upped its stake in Thermo Fisher Scientific by 20% to 516,127 shares during the April-June period.

#1 Humana Inc (NYSE:HUM)

– Shares Owned by Glenview Capital (as of June 30): 8.66 Million

– Value of Holding (as of June 30): $1.56 Billion

With Glenview Capital increasing its stake in Humana Inc (NYSE:HUM) by 34% during the second quarter, the Medicare giant continued to remain the fund’s largest equity holding at the end of that period. Last month, the U.S. Department of Justice (DOJ) filed an antitrust suit in U.S. District Court in Washington, DC in order to block Humana Inc (NYSE:HUM)’s $33 billion merger with Aetna Inc (NYSE:AET). Following this news both the companies issued statements criticizing the DOJ’s move and recently Aetna Inc (NYSE:AET) has threatened to pull out of Obamacare if this merger is blocked. While some industry experts are currently skeptical of this merger deal going through, analysts who track both the stocks still have conviction that the merger will get completed eventually. On August 3, Humana Inc reported its fiscal 2016 second quarter numbers, declaring EPS of $2.30 on revenue of $14 billion for that period versus analysts’ expectation of EPS of $2.23 on revenue of $13.59 billion. The popularity of Humana Inc  among funds covered by us remained largely unchanged during the second quarter as 64 hedge funds reported owning a stake in it at the end of June, the same number that had a stake in it at the end of March, and the aggregate value of their holdings in saw only a maginal rise of 3.7% to $5.82 billion. Apart from Glenview, Phill Gross and Robert Atchinson‘s Adage Capital Management was another hedge fund that increased its stake in the company during the second quarter, by 24% to 1.15 million shares.

Disclosure: None