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Allergan, Humana, Biogen: Billionaires’ Favorite Healthcare Stocks For Q3

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The healthcare sector had one of its worst years in almost a decade last year when several big names from the space saw their stocks plunge dramatically. The beginning of 2016 was equally dismal for several healthcare stocks, but they have managed to recoup some of the losses they suffered last year over the past few months. Although the S&P 500 Health Care (Sector) Index is still lagging behind the S&P 500 by 298 basis points in year-to-date returns, it is currently up by over 4% in 2016.

Considering that healthcare stocks have now stabilized after a period of severe correction, we at Insider Monkey have compiled a list of stocks from the sector based on their popularity at the end of the second quarter among the 62 billionaire investors that we cover. In this post, we will take a look at the five healthcare stocks that topped the charts and will discuss how their popularity among the billionaire investors in our database has changed since the end of the first quarter.

At Insider Monkey, we track around 750 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details).

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#5 Biogen Inc (NASDAQ:BIIB)

– Number of Billionaires With Long Positions (as of June 30): 11

– Aggregate Value of Billionaires’ Holdings (as of June 30): $1.99 billion

Let’s start with Biogen Inc (NASDAQ:BIIB), whose ownership among billionaire investors remained unchanged during the second quarter, though the aggregate value of their holdings in it increased by $769 million. Billionaire Ken Griffin‘s Citadel Investment Group hiked its stake in the company three-fold to almost 1.36 million shares during that time. Although Biogen Inc (NASDAQ:BIIB)’s stock was trading in the red in 2016 until last month, it has registered significant gains following the company’s second quarter earnings release and currently trades up by 3.19% year-to-date. A lot of the gains that the stock has seen this month have also come on the back of rumors that the company might be acquired by either Merck (NYSE:MRK) or Allergan (NYSE:AGN). However, Allergan has since denied having any interest in buying Biogen and nothing official has surfaced from Merck. According to some analysts who track the stock, Biogen might be inflating its reported earnings by showing the 30% revenue that it pays to the former owners of its bestselling drug Tecfidera, which accounts for 40% of the company’s revenue, as goodwill rather than as an expense. On August 17, analysts at Morgan Stanley reiterated their ‘Overweight’ rating on the stock, but lowered their price target on it to $368 from $385.

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#4 Pfizer Inc. (NYSE:PFE)

– Number of Billionaires With Long Positions (as of June 30): 12

– Aggregate Value of Billionaires’ Holdings (as of June 30): $2.54 billion

Pfizer Inc. (NYSE:PFE) saw a marked decline in its popularity during the second quarter among the billionaire investors in our system, as its ownership among them declining by five and the aggregate value of their holdings in it slumped by $394 million. Billionaires that sold their entire stake in the company during the period included Andreas Halvorsen (Viking Global) and Barry Rosenstein (JANA Partners). Pfizer Inc. (NYSE:PFE)’s stock has made considerable gains this year after the company called off its merger with Allergan in early-April. Though the stock has given up some of those gains this month following the company’s second quarter earnings release, it is still trading up by over 7% in 2016. On August 22, the company announced that it has agreed to acquire California-based biotech major Medivation Inc (NASDAQ:MDVN) for around $14 billion or $81.50 per share. The deal is expected to be completed by the fourth quarter of 2016. A day after that announcement, analysts at Piper Jaffray reiterated their ‘Buy’ rating on Pfizer’s stock and set a price target of $54 on it, which represents potential upside of 54%.

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We’ll look at billionaires’ three favorite healthcare stocks on the next page.

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