Baron Funds, an investment management company, released its “Baron Health Care Fund” second quarter 2024 investor letter. A copy of the letter can be downloaded here. The fund declined 2.55% (Institutional Shares) in the quarter compared to a 1.02% decline for the Russell 3000 Health Care Index (benchmark) and a 3.22% gain for the Russell 3000 Index (the Index). The underperformance in the quarter was due to active sub-industry/market cap weights. In addition, please check the fund’s top five holdings to know its best picks in 2024.
Baron Health Care Fund highlighted stocks like Tenet Healthcare Corporation (NYSE:THC) in the second quarter 2024 investor letter. Tenet Healthcare Corporation (NYSE:THC) is a diversified healthcare services company headquartered in Dallas, Texas. The one-month return of Tenet Healthcare Corporation (NYSE:THC) was 9.66%, and its shares gained 94.05% of their value over the last 52 weeks. On August 1, 2024, Tenet Healthcare Corporation (NYSE:THC) stock closed at $147.95 per share with a market capitalization of $13.911 billion.
Baron Health Care Fund stated the following regarding Tenet Healthcare Corporation (NYSE:THC) in its Q2 2024 investor letter:
“We established a small position in Tenet Healthcare Corporation (NYSE:THC), a leading provider of health care services. Tenet’s care delivery network includes United Surgical Partners International (USPI), which operates over 600 ambulatory surgical centers (ASCs), surgical hospitals, and other outpatient facilities. Tenet also operates over 50 acute care and specialty hospitals, as well as Conifer, a leading provider of revenue cycle management services. The combination of ASCs and hospital assets in local markets gives USPI a negotiating advantage with payors and vendors, supporting industry leading ASC operating margins. Tenet management has been divesting its less competitively positioned acute care hospitals and other non-core assets to focus on its ASC business. The $90 billion outpatient surgical market is enjoying strong secular tailwinds driven by aging U.S. demographics and the shift of procedures to lower cost outpatient settings. Outpatient procedures cost roughly 50% less than those done in hospitals and are preferred by both patients and physicians. Estimates are that an incremental $60 billion worth of cases are appropriate to be done outpatient, which should drive multi-year mid-single-digit same store growth for USPI – a combination of both higher acuity and volumes – enhanced by de novo projects and M&A in a highly fragmented space. Tenet’s hospital sales have been executed at attractive multiples with the proceeds used to pay down debt. As Tenet’s faster growing ASC business increases as a percentage of the company’s overall cash flows, we believe the company’s valuation multiple has room to expand.”
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Tenet Healthcare Corporation (NYSE:THC) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 63 hedge fund portfolios held Tenet Healthcare Corporation (NYSE:THC) at the end of the first quarter which was 68 in the previous quarter. In the second quarter, Tenet Healthcare Corporation (NYSE:THC) generated total net operating revenues of $5.1 billion, and consolidated adjusted EBITDA of $945 million, up 12% compared to second quarter 2023. While we acknowledge the potential of Tenet Healthcare Corporation (NYSE:THC) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In another article, we discussed Tenet Healthcare Corporation (NYSE:THC) and shared Meridian Contrarian Fund’s views on the company. In addition, please check out our hedge fund investor letters Q2 2024 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
