With the latest round of 13F filings behind us, there were several moves and trends that caught our attention during the second quarter, based on the collective activity of the smart money we track (the absolute best of the best money managers in the world). Insider Monkey has processed the data relating to these filings and has shared a few of these findings already, through a series of articles. Some of the information that we have covered in our previous pieces include the most popular overall stocks, that stocks that hedge funds were hoarding shares of, and the transportation stocks that hedge funds were selling out of, among others. In this article, we focus on the five mid-cap healthcare stocks that hedge funds are crazy about. To know more about which stocks these are, read on.
But why do we track the hedge fund activities? From one point of view we can argue that hedge funds are consistently underperforming when it comes to net returns over the last three years, when compared to the S&P 500. But that doesn’t mean that we should completely neglect the hedge funds’ activities. There are various reasons behind the low hedge fund returns. Our research indicated that 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 S&P 500 index by double digits annually. The 15 most popular small cap stock picks among hedge funds also bested passive index funds by around 60 percentage points over the 35 month period beginning in September 2012, delivering 118% returns (read the details here).
5. DaVita HealthCare Partners Inc (NYSE:DVA)
Investors with Long Positions (as of June 30): 44
Aggregate Value of Investors’ Holdings (as of June 30): $5.29 Billion
During the second quarter, the number of hedge funds tracked by Insider Monkey that were long in DaVita HealthCare Partners Inc (NYSE:DVA) increased by six. On the contrary, the aggregate of hedge funds in the stock dropped by 2.98%. The Denver, Colorado-based kidney care company announced on Monday that it would be acquiring Renal Ventures for $415 million in a bid to boost its kidney division. Renal Ventures was a privately-owned company that provides dialysis care to patients. DaVita HealthCare Partners Inc (NYSE:DVA) is up by 1.2% year-to-date, but has lost 8.82% over the past three months. Berkshire Hathaway, led by legendary investor Warren Buffett, emerged as the biggest shareholder out of the firms we track, with 38.57 million shares worth $3.06 billion. Billionaire Stephen Mandel’s Lone Pine Capital came in a distant second with 5.46 million shares valued at $433.57 million. John Armitage‘s Egerton Capital Limited, Israel Englander’s Millennium Management, and Anand Parekh’s Alyeska Investment Group are some of the funds that upped their positions in DaVita HealthCare Partners Inc (NYSE:DVA) during the quarter.
4. Edwards Lifesciences Corp (NYSE:EW)
Investors with Long Positions (as of June 30): 46
Aggregate Value of Investors’ Holdings (as of June 30): $2.16 Billion
Edwards Lifesciences Corp (NYSE:EW) is another mid-cap healthcare stock that posted an increase in the number of hedge funds with long positions, out of the ones we track, with that figure rising by eight during the second quarter of 2015. Their aggregate holdings were also up by 25.14%. Edwards Lifesciences is a medical equipment company based in Irvine, California, specializing in the design and manufacture of artificial heart valves and devices for hemodynamic monitoring. Edwards Lifesciences Corp (NYSE:EW) recently announced the completion of its acquisition of CardiAQ Valve Technologies, Inc., a company that specializes in the development of transcatheter mitral valve replacement systems. The merger agreement says that Edwards paid $350 million in cash and will part with an additional $50 million upon the achievement of a European regulatory milestone. At the end of the second quarter, AQR Capital Management, led by Cliff Asness, emerged as the biggest shareholder of the company out of the funds we track. The fund held 2.40 million shares worth $342.19 million after raising its stake in the stock by 25%.
3. Universal Health Services, Inc. (NYSE:UHS)
Investors with Long Positions (as of June 30): 50
Aggregate Value of Investors’ Holdings (as of June 30): $1.52 Billion
The number of hedge funds invested in Universal Health Services, Inc. (NYSE:UHS) out of the more than 700 that we track increased by six during the second quarter of 2015, while the aggregate investment value of these hedge funds rose by 64.38%. The Fortune 500 Company recently announced a dividend of $0.10 per share to shareholders of record as of September 1, with the dividend payable on September 15. This represents an annualized dividend yield of 0.29%. Besides the dividend, the hospital management company recently posted earnings per normalized share of $1.80, representing a 19.21% increase on a year-over-year basis. This year, the company’s shares have risen by an impressive 26.70%. At the close of the second quarter, Viking Global, headed by Andreas Halvorsen, emerged as the biggest shareholder of Universal Health Services, Inc. (NYSE:UHS) in our database. The fund initiated a new position in the stock of 1.22 million shares with a market value of $173.47 million at the end of the quarter.
2. Laboratory Corp. of America Holdings (NYSE:LH)
Investors with Long Positions (as of June 30): 52
Aggregate Value of Investors’ Holdings (as of June 30): $2.41 Billion
While the number of hedge funds we track that were long in Laboratory Corp. of America Holdings (NYSE:LH) fell by seven during the second quarter and the value of their aggregate ownership also slipped by 2.55%, the overall sentiment of the smart money was still bullish. The company recently announced that its VistaSeq Hereditary Cancer Panel, which is a novel, 27-gene panel designed for identifying patients with high risks of different cancers, is now available nationally. In its most recent quarterly results, Laboratory Corp. of America Holdings (NYSE:LH) posted earnings per share of $2.09, representing a year-over-year increase of $0.43. This year, the stock’s share price has gone up by a solid 11.05%, although it has been rather flat over the past three months. During the second quarter, Glenview Capital, managed by billionaire Larry Robbins, a staunch supporter of the healthcare industry, created a new position in the stock consisting of 3.98 million shares valued at $482.89 million. Decade Capital Management also opened a new position, of 222,435 shares with a market value of $26.96 million.
1. Endo International plc – Ordinary Shares (NASDAQ:ENDP)
Investors with Long Positions (as of June 30): 67
Aggregate Value of Investors’ Holdings (as of June 30): $4.46 Billion
During the second quarter, the number of hedge funds tracked by Insider Monkey that were long in Endo International plc – Ordinary Shares (NASDAQ:ENDP) increased by four and their investment value rose by 6.56%. Two Endo International patents relating to the extended-release version of its long-term pain drug Opana were recently upheld by a U.S. District Court, a move that will see generic versions of the drug sold by Allergan PLC (NYSE:AGN), among other companies, removed from the market, while those not yet released will be prevented from doing so. The court will decide whether Allergan will pay for damages relating to its infringement of said patents. In Endo International’s second quarter financial report, it posted a loss of $0.49 per share, compared to the profit per share of $0.25 that it posted last year. Year-to-date, the company’s stock price has gained 9.54%. At the end of the second quarter, OZ Management, headed by billionaire Daniel S. Och, was long in Endo International plc – Ordinary Shares (NASDAQ:ENDP) with 8.84 million shares valued at $704.09 million. Larry Robbins was also a notable shareholder of this stock, owning 8.84 million shares valued at $703.92 million on June 30.
Disclosure: None
