Five Healthcare Stocks Billionaires Are Bullish On

Healthcare stocks started 2016 with the left foot and, but most stocks have managed to recuperate most of the ground lost. Despite the poor performance, hedge funds remained bullish on the healthcare sector aiming for the long run. This is why, in this article, we will take a look into five healthcare stocks that ranked as the most popular among the funds founded and/or managed by billionaire investors from our database.

Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see the details here).

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#5. CIGNA Corporation (NYSE:CI)

Let’s start with CIGNA Corporation (NYSE:CI), which counted 61 hedge fund supporters in our database by the end of the last fully reported quarter – the first quarter of 2016, down from 67 in the previous quarter. Their combined stakes, which accounted for more than 10% of the company’s shares outstanding, were valued at $3.8 billion by March 31. Among these firms, there were 13 that are ran by billionaires, up from 11 in the previous quarter; their stakes were worth more than $1.8 billion by the end of March. Shares of CIGNA Corporation (NYSE:CI) are down by over 13% since the beginning of the year amid pressure from the US government to block Cigna’s planned acquisition by Anthem, alongside the deal between Aetna and Humana. In July, the Justice Department sued Anthem and Aetna over their deals with Cigna and Humana, worth $48 billion and $37 billion, saying that the mergers would affect the healthcare costs and limit the choice for consumers. Nevertheless, Cigna has a plan B if the deal falls through, which involves stock buybacks and acquisitions, CEO David Cordani assured investors in a recent earnings call.

#4. Walgreens Boots Alliance Inc (NASDAQ:WBA)

Walgreens Boots Alliance Inc (NASDAQ:WBA) saw the number of investors in our database decline to 72, from 78 during the first quarter, while the number of billionaires fell by 1, to 14. As of March 31, these billionaires owned about $2.5 billion in the company’s stock. Shares of Walgreens Boots Alliance Inc (NASDAQ:WBA) have inched down by over 2% since the beginning of the year. The company is currently in the process of taking over its rival Rite Aid Corporation and in its financial report for the fiscal third quartersaid the transaction is going as planned. Moreover, for the quarter, Walgreens posted EPS of $1.18, which topped the estimates of $1.14, while revenue of $29.5 billion missed the expectations by $210 million.

#3. Humana Inc (NYSE:HUM)

Among the investors that we track, 64 held long positions in Humana Inc (NYSE:HUM) by the end of the first quarter, up from 58 in the previous quarter. Among these funds, 15 were billionaire investors, who amassed $3.1 billion worth of stock heading into the second quarter. The stock is trading slightly in the green year-to-date as investors are watching how its acquisition by Aetna is progressing. Humana posted a strong second-quarter with EPS of $2.30 and revenue of $14.01 billion topping the consensus estimates by $0.07 and $420 million, respectively.

#2. Pfizer Inc. (NYSE:PFE)

Pfizer Inc. (NYSE:PFE) is the runner-up in this list, with 119 investors from our database holding shares, including 17 billionaire funds, which held $2.9 billion worth of stock in aggregate. Shares of Pfizer Inc. (NYSE:PFE) are up by over 8.9% year-to-date amid three consecutive, better-than-expected financial reports. Pfizer’s second-quarter revenue went up by 11% on the year to $13.15 billion and topped the consensus estimate by $140 million, while net income per share stood at $0.64, versus expectations of $0.62.

#1. Allergan plc Ordinary Shares (NYSE:AGN)

Allergan plc Ordinary Shares (NYSE:AGN) saw 170 funds in our database holding shares at the end of March. Among those funds, 28 were funds managed or founded by billionaires and they amassed $9.1 billion worth of stock heading into the second quarter. The stock has lost over 19% since the beginning of the year, mainly due to the termination of its merger with Pfizer and worse than expected revenue reported for the first two quarters. Even though the deal with Pfizer was not completed, Allergan managed to complete the sale of its generic unit to Teva Pharmaceuticals and seems to be interested in doing more acquisitions. Recently, Allergan has agreed to buy privately-held eye care company ForSight VISION5 and Wall Street Journal has recently reported that it might pursue the acquisition of Biogen.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.