Below we take a look at Jim Simons Stock Portfolio: 5 Biggest Healthcare Stocks. For our methodology and a more comprehensive list please see Jim Simons Stock Portfolio: 10 Biggest Healthcare Stocks.
5. Molina Healthcare, Inc. (NYSE:MOH)
Value of Renaissance Technologies’ 13F Position: $483 million
Number of Hedge Fund Shareholders: 40
Jim Simons’ RenTech scaled back the size of its Molina Healthcare, Inc. (NYSE:MOH) holding by 15% during Q3, leaving the quant fund with over 1.46 million shares entering the final quarter of 2022. Molina Healthcare hit an all-time high in hedge fund ownership during Q3, with Lee Ainslie’s Maverick Capital and Steve Cohen’s Point72 Asset Management among the funds adding MOH to their portfolios during Q3.
The global health insurance market is a gigantic one, being estimated to hit $3.6 trillion by 2028, and Molina Healthcare, Inc. (NYSE:MOH) is one of the biggest players in the United States with 5.2 million customers. The company’s adjusted diluted EPS grew by 54.1% year-over-year to $4.36 in Q3, and the company anticipates double digit EPS growth over the next three years.
In December, Bank of America analyst Kevin Fischbeck upgraded Molina Healthcare to ‘Neutral’ from ‘Underperform’ and expressed confidence that the company will be able to achieve its projected 13% to 18% annual EPS growth through 2025. He has a $388 price target on the stock.
Renaissance Investment Group (which is not affiliated with Renaissance Technologies) made the following comment about Molina Healthcare, Inc. (NYSE:MOH) in its Q3 2022 investor letter:
“Lastly, Molina Healthcare, Inc. (NYSE:MOH) returned 18.0% after reporting strong quarterly results that saw solid membership growth and a favorable medical cost environment. The stock also benefited from a rotation to companies with more stable and predictable business models, a desirable attribute in the current economic environment.”
4. United Therapeutics Corporation (NASDAQ:UTHR)
Value of Renaissance Technologies’ 13F Position: $534 million
Number of Hedge Fund Shareholders: 46
Jim Simons’ quant fund trimmed the size of its United Therapeutics Corporation (NASDAQ:UTHR) stake by 9% during Q3, owning 2.55 million UTHR shares on September 30. Only one fund among the select group of money managers tracked by Insider Monkey’s database had a larger position in United Therapeutics than Renaissance Technologies, that being Behzad Aghazadeh’s VenBio Select Advisor, which owned 2.93 million shares and had 11.3% 13F exposure to the stock.
United Therapeutics Corporation (NASDAQ:UTHR) has a portfolio of drugs that focus on mitigating the effects of hypertension, particularly in those looking to exercise or perform other strenuous activities. Strong sales for hypertension treatment Tyvaso helped propel the company to 16% quarter-over-quarter sales growth in Q3, with overall sales hitting $516 million.
Analysts seem to be split on United Therapeutics Corporation (NASDAQ:UTHR)’s near-term potential. On the one hand, analysts’ consensus 2023 earnings estimates have jumped by nearly 50% to $2.83 in recent months. On the other hand, Goldman Sachs recently slapped a ‘Sell’ rating and $230 price target on the stock ($48 below its current price), citing a lack of growth drivers.
3. Gilead Sciences, Inc. (NASDAQ:GILD)
Value of Renaissance Technologies’ 13F Position: $618 million
Number of Hedge Fund Shareholders: 56
Renaissance Technologies went on a Gilead Sciences, Inc. (NASDAQ:GILD) buying spree during Q4 2021 and Q1 2022, but has sold off about a third of its position over the past two quarters, including cutting its stake by 26% during Q3 to just over 10 million shares. Gilead no longer ranks close to the top healthcare stocks in terms of hedge fund ownership as it did several years ago, with the number of funds long GILD currently languishing near all-time lows.
Hedge funds may be scared off by Gilead Sciences, Inc. (NASDAQ:GILD)’s substantial long-term debt burden, which currently weighs in at $25 billion. And with the company paying out 40% of its cash flow to investors in the form of dividend payments, that leaves less available to tackle that debt burden. Gilead does have promising growth prospects, including an oncology business that grew sales by 79% during the first nine months of 2022.
Ariel Investment discussed Gilead Sciences, Inc. (NASDAQ:GILD)’s long-term opportunity in virology in its Q3 2022 investor letter:
“At the stock level, biopharmaceutical company Gilead Sciences, Inc. (NASDAQ:GILD) was the top contributor in the quarter based on positive data released in a study evaluating Trodelvy versus comparative chemotherapy in patients with metastatic breast cancer. The detailed findings increased investor confidence the drug would receive incremental approvals for a broader range of breast cancer treatments. Shares also received a boost on news the TAF patent portfolio for HIV drugs will be extended from the middle of this decade through the early 2030s, thereby lengthening the company’s long-term opportunity in the virology market.”
2. Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX)
Value of Renaissance Technologies’ 13F Position: $619 million
Number of Hedge Fund Shareholders: 49
Jim Simons boosted RenTech’s stake in Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) by 22% during Q3 to 2.14 million shares, elevating the stock to his second-largest healthcare position and sixth-largest holding overall. VRTX shares had a strong 2022, gaining 30%, which prompted some profit-taking from other money managers, as the number of funds long Vertex Pharmaceuticals fell by 22% during the first three quarters of the year.
Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) is the leading cystic fibrosis company in the world, with four prominent treatments in the space, including Trikafta, which was launched in 2019 and had already pulled in $5.6 billion in revenue just two years later. Vertex’s pipeline is also poised to help the company expand into other treatment areas, including diabetes, pain management, and blood disorders like beta thalassemia and sickle cell disease.
ClearBridge Investments discussed some of the recent developments in Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX)’s pipeline in its Q3 2022 investor letter:
“Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), which has developed the leading treatments for cystic fibrosis, also saw meaningful positive developments in its pipeline in the third quarter around areas like pain, diabetes and blood disorders. Vertex has been able to consistently grow revenues and earnings through the latest period of economic headwinds, enabling investment in R&D to target treatments in these new areas.”
1. Novo Nordisk A/S (NYSE:NVO)
Value of Renaissance Technologies’ 13F Position: $1.53 billion
Number of Hedge Fund Shareholders: 40
Topping the list of Jim Simons’ biggest healthcare stocks is Novo Nordisk A/S (NYSE:NVO), which also ranks as his top overall stock pick by a considerable margin, with the position being $635 million bigger than his second-largest holding, Microsoft Corporation (NASDAQ:MSFT). That despite Simons trimming his fund’s stake in NVO by 13% during Q3 to 15.3 million shares. Novo Nordisk rose to an all-time high in hedge fund ownership during Q3, with the number of funds long NVO having risen by 67% since the middle of 2021.
Renaissance has invested heavily in several companies with prominent exposure to diabetes, so it’s not surprising that it also has the market leader Novo Nordisk A/S (NYSE:NVO) as its top stock pick. The company controls about 32% of the diabetes market, headlined by Ozempic, which grew revenue by 86% year-over-year during the first nine months of 2022 and which accounted for about one-third of the company’s overall revenue. It’s also developing an Alzheimer’s treatment, which appears to be another key market that many of RenTech’s top healthcare stock picks are targeting.
ClearBridge Investments also discussed Novo Nordisk A/S (NYSE:NVO) in its Q3 2022 investor letter, noting the company’s strong balance sheet and pricing power:
“The proceeds from our repositioning sales continue to be put to work across the Strategy’s secular and structural growth buckets. In particular, we have been adding more to secular, quality compounders such as Danish biotech company Novo Nordisk A/S (NYSE:NVO) and Japanese medical equipment supplier Olympus (OTCPK:OCPNF). These companies have strong balance sheets, good cash flow generation and significant pricing power, characteristics that should enable them to get stronger through the storm impacting international equities.”
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