Larry Robbins’ Glenview Capital has acquired more shares of Tenet Healthcare Corp. (NYSE:THC). In a Form 4 filed with the U.S. Securities and Exchange Commission, Glenview Capital disclosed purchases of 697,917 shares of the company at prices ranging from $54.00 to $54.91. Following the transactions, the hedge fund managed by Larry Robbins owns 15.49 million shares of Tenet Healthcare. This is the second acquisition of the company’s stock, disclosed by Glenview in the last couple of months. At the end of June, the investor bought 979,500 shares after the Supreme Court ruled in favor of the Affordable Care Act.
Glenview Capital Management is a New York-based hedge fund established by Larry Robbins in 2001. The hedge fund is well-known for its impressive returns generated under the leadership of Larry Robbins since the fund’s inception. He is the stock picker in charge at the firm and seeks for investment opportunities by analyzing the following four aspects: economic growth, liquidity, low valuations and excess cash balances. Glenview Capital generated an annualized return of 14.2% for a decade since the fund’s inception. Moreover, Glenview Capital’s flagship fund, Glenview Funds, has returned 301% over the same period of ten years, compared to the 15% return generated by S&P 500. The hedge fund primarily invests in the healthcare, industrial, financial, services and technology sectors. According to its most recent 13F with the SEC, Glenview Capital manages an equity portfolio with a value of $21.90 billion as of March 31, 2015.
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But why do we track the hedge fund activities? From one point of view we can argue that hedge funds have consistently underperformed when it comes to net returns over the last three years, compared to the S&P 500. But that doesn’t mean that we should completely neglect the hedge funds’ activity. Our research has indicated that a specific group hedge funds’ long positions actually beat the market. In our back-tests covering the 1999-2012 period, hedge funds’ top small cap stocks edged the market by double digits annually. The 15 most popular small cap stock picks among hedge funds also beat the S&P 500 ETF (SPY) by around 66 percentage points over the 35-month period beginning with September 2012 (read more details here).
Tenet Healthcare Corp. (NYSE:THC) is a diversified healthcare services company that operates general acute care hospitals, short-stay surgical hospitals and outpatient centers through its subsidiaries, partnerships and joint ventures. Moreover, one of the company’s subsidiaries, Conifer Health Solutions, provides technology-enabled performance improvement and health management solutions to hospitals, health systems, integrated delivery networks (IDN), among others. The shares of Tenet have gained 5% since the beginning of the year, despite losing some ground since mid-July.
The Affordable Care Act signed into law by President Barack Obama in March 2010 and other government changes related to healthcare payments have triggered a trend of hospital industry consolidation over the last few years. As a result, the wave of M&A activity might have assisted some companies in lowering their costs and deal with the downward pressure on revenues. Tenet has embarked on this wave of consolidation as well. On July 15, Tenet Healthcare and Dignity Health and Ascension announced a newly-created partnership that will own and operate Carondelet Health Network based in Tucson, Arizona. At the time, Ascension owned 100% of Carondelet, while Tenet was set to be the majority partner in the new joint venture that would manage the operations of three hospitals, related physician practices, outpatient and ambulatory services, among other affiliated businesses. However, this is just one of the deals completed by Tenet Healthcare lately. Tenet completed another transaction earlier this summer that gave it control of United Surgical Partners International. Similarly, the deal created a joint venture with the private equity firm Welsh, Carson, Anderson & Stowe that combines the short-stay surgery and imaging center assets of Tenet and United Surgical Partners International (the aforementioned private equity firm owns USPI). At the same time, Tenet acquired an U.K. short-stay surgery-center company called Aspen Healthcare Ltd. from Welsh Carson. Therefore, it seems that Tenet has been continuously attempting to develop its business and operations, which is actually what investors expect from this type of companies.
Let’s now take a quick look at the company’s freshly-announced financial results for the second quarter of 2015. Tenet Healthcare posted net operating revenue of $4.49 billion for the quarter, compared to $4.36 billion reported a year ago. The company also reported adjusted EBITDA of $568 million, up by 23.5% year-over-year, while its adjusted net income stood at $76 million or $0.75 per diluted share, compared to adjusted $17 million or $0.28 per share reported for the second quarter of 2014. Within our database of over 700 hedge funds, Perry Capital, founded and overseen by Richard Perry, represents the second-largest shareholder of Tenet Healthcare Corp. (NYSE:THC), holding an equity stake of 1.58 million shares as of March 31.
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