We discussed Michael Castor’s Sio Capital earlier this summer, and in case you need convincing of why we called him “the next David Einhorn,” give this April analysis a look through.
A few healthcare companies Castor has mentioned he’s liked this year are: Cardinal Health, Inc. (NYSE:CAH), NPS Pharmaceuticals, Inc. (NASDAQ:NPSP), and Anacor Pharmaceuticals Inc (NASDAQ:ANAC). This trio’s average year-to-date return in 2013 is 104.7%.
Yea, you read that right.
NPS Pharmaceuticals, Inc. (NASDAQ:NPSP), up almost 200% this year, is the top dog, and Anacor Pharmaceuticals Inc (NASDAQ:ANAC) has also gained over 100%.
Bravo, Mr. Castor, bravo.
With regard to Cardinal Health, Inc. (NYSE:CAH), here’s what he had to say about the healthcare services company:
“The valuation of Cardinal Health, Inc. (NYSE:CAH) is attractive, trading at about 12 times. Cardinal has an overhang in that a large contract with CVS is up for renewal. Cardinal Health, Inc. (NYSE:CAH) distributes what’s known as ‘bulk’ product to CVS, meaning huge crates of drugs to central locations. This is in contrast to the work Cardinal Health, Inc. (NYSE:CAH) does for individual drug stores, where the company will drop off small volumes of drugs as the pharmacy needs them. In the case of ‘bulk’, CVS does the work of redistributing products to the individual store branches. Because Cardinal is simply delivering large crates, the mark-up and profit is small. So, on a revenue basis it looks like it’s a big chunk of revenue that is at risk, but on an earnings basis it’s much less significant.”
Cardinal Health, Inc. (NYSE:CAH) still trades at a forward P/E of 12.7x, and the growth-related thesis remains intact.
His thoughts on NPS Pharmaceuticals, Inc. (NASDAQ:NPSP) were equally as spot on:
“NPS Pharmaceuticals, Inc. (NASDAQ:NPSP) has three legs that really underpin their revenue. The first one is a set of royalties that they get with the biggest being on Sensipar, a drug sold by Amgen. […] The second source of revenue is a drug that is just now being launched for an indication called short bowel syndrome. […] The last drug that is still in the pipeline is for people who have had damage to their parathyroid glands and it’s actually replacement parathyroid hormone. I look at these three levers and I’ve been impressed that NPS Pharmaceuticals, Inc. (NASDAQ:NPSP), unlike a lot of small companies, is very conscious of what they’re spending.”
And Anacor Pharmaceuticals Inc (NASDAQ:ANAC):
“We foresee four ways to win with our investment in Anacor Pharmaceuticals Inc (NASDAQ:ANAC). First, Anacor has a drug to treat toe nail fungus. […] Second, Anacor Pharmaceuticals Inc (NASDAQ:ANAC) is suing Valeant Pharmaceuticals over their competing product. […] Third, Anacor Pharmaceuticals Inc (NASDAQ:ANAC) is developing a topical cream to treat atopic dermatitis, an itchy, painful rash most commonly found in infants. Finally, Anacor Pharmaceuticals Inc (NASDAQ:ANAC) could earn a royalty of about 10% on two products that Lilly is developing for its animal health division.”
If he’s been so right before, the obvious question is:
What’s Michael Castor’s next big stock pick?
Michael Castor will be presenting his latest investment idea at the 9th New York Annual Value Investing Congress, the event CNBC dubbed “The Superbowl of Value Investing.” The event takes place September 16 & 17, 2013 at Jazz at Lincoln Center’s Frederick P. Rose Hall and some of the world’s most successful investors are slated to attend, including Jeff Ubben, Mick McGuire, and Alex Roepers, to name a few. In addition, this year’s event will feature a special presentation by Tyler and Cameron Winklevoss. For your special Insider Monkey discount, go to www.ValueInvestingCongress.com/InsiderMonkey and use discount code N13IM6.
Disclosure: none
