Billionaire Larry Robbins’ Big Q4 Moves in Humana Inc. (HUM), CIGNA Corporation (CI) and Others

Billionaire Larry Robbins, the founder of Glenview Capital Management, has been among the most scrutinized and closely-watched hedge fund managers in recent years due to his bullish bets on Obamacare. The New York-based hedge fund, founded in September 2000, had a terrible 2015 in terms of performance, as it recorded a loss of 17% last year. In fact, Glenview was among the worst performing hedge funds last year, and this year has yet to produce a turnaround for the struggling investment vehicle. The billionaire investor apologized for the terrible performance in a letter to investors for the third quarter, saying “I’ve failed to protect your capital, and mine, from a significant drawdown, despite a flat market”. According to out calculations, Glenview Capital’s long positions in public companies with a market capitalization above the $1 billion level posted a negative weighted average return of 7.5% in 2015, based on each position’s size at the beginning of each quarter. While our figures can differ from the actual returns of those long positions, as we can’t account for when in each quarter changes might have been made to them, it suggests that more than half of Glenview’s losses in 2015 were not due to long stock picking. As Larry Robbins is widely-known for his successful bets in the healthcare sector, it’s worth seeing what stocks the investor is betting on for 2016, so this article will discuss the investor’s most prominent moves carried out during the final quarter of 2015.

Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).

Let’s begin our discussion with Larry Robbins’ largest equity position as of the end of the fourth quarter. The billionaire investor lifted his stake in Humana Inc. (NYSE:HUM) by 1.62 million shares during the fourth quarter, to 8.25 million shares, which were valued at $1.47 billion on December 31. In July 2015, Aetna Inc. (NYSE:AET) and Humana inked a merger agreement that could create one of the largest health insurance companies in the United States. Under the terms of the deal, Humana shareholders are set to receive 0.8375 shares of Aetna and $125 in cash for each Humana share. The $37 billion acquisition still needs the approval of federal regulators, which is why the shares of Humana Inc. (NYSE:HUM) are currently trading at a huge discount to the value of the proposed deal and are down by 3% year-to-date. Last Monday, Florida became the tenth state to approve the multi-billion-dollar merger. Andreas Halvorsen’s Viking Global reported owning 4.33 million shares of Humana Inc. (NYSE:HUM) through the latest round of 13F filings.

In the fourth quarter of 2015, Glenview Capital upped its position in CIGNA Corporation (NYSE:CI) by 2.40 million shares to nearly 7.00 million shares. The fund’s position in CIGNA was valued at $1.02 billion on December 31 and comprised 5.76% of its equity portfolio. In the summer of 2015, Anthem Inc. (NYSE:ANTM) agreed to buy CIGNA amid consolidation in the health insurance industry. The deal is set to create the nation’s largest health insurance company should regulators approve it. The $54 billion deal has been approved by four states thus far, while the other 22 states are in the process of reviewing it. The terms of the deal say that CIGNA Corporation (NYSE:CI) shareholders will receive $103.40 in cash and 0.5152 shares of Anthem per CIGNA share. In the meantime, the shares of CIGNA are trading at a 20% discount to the deal price, with investors being concerned that the merger could be blocked. Thomas Steyer’s Farallon Capital owns 2.21 million shares of CIGNA Corporation (NYSE:CI) as of December 31.

The New York-based hedge fund firm was extremely bullish on HCA Holdings Inc. (NYSE:HCA) in the December quarter, as it increased its position in HCA by 8.79 million shares to 14.30 million shares, valued at $967.15 million at the end of 2015. The shares of the owner and operator of hospitals and related healthcare entities are 2% in the green year-to-date. The company’s revenue for 2015 totaled $39.68 billion, which represented an increase from the $36.92 billion that it reported for 2014. HCA Holdings Inc. (NYSE:HCA)’s net income also rose to $2.13 billion or $4.99 per diluted share in 2015, up from $1.88 billion or $4.16 per diluted share reported for 2014. It should be noted that the stock trades at a forward P/E of 10.18, which is below the average of 14.10 for the Healthcare industry. HCA’s management anticipates 2016 revenue to be in the range of $41.5 billion to $42.5 billion. Samuel Isaly’s Orbimed Advisors increased its position in HCA Holdings Inc. (NYSE:HCA) by 3% during the October-to-December period, to 5.96 million shares.

Glenview Capital did not share the same optimism when it came to Thermo Fisher Scientific Inc. (NYSE:TMO), as the investment firm trimmed its stake in the company by 2.58 million shares during the December quarter, to 5.93 million shares. The stake was worth $841.64 million at the end of December 2015. The scientific-equipment maker has seen its shares decline by 8% since the beginning of 2016 and the stock currently trades at a forward P/E multiple of 14.97, which is below the multiple of 17.66 for competitor Agilent Technologies Inc. (NYSE:A). Thermo Fisher Scientific Inc. (NYSE:TMO)’s target markets include pharmaceutical and biotech companies, hospitals, universities, research institutions and government agencies. Congress approved a $2 billion increase to the budget for the National Institutes of Health in December, which makes us believe that the increased budget could help improve the performance of Thermo Fisher in the coming year. Thermo Fisher reported revenue of $16.97 billion for 2015, up from $16.89 billion reported for 2014. Boykin Curry’s Eagle Capital Management reported owning 4.46 million shares of Thermo Fisher Scientific Inc. (NYSE:TMO) through its latest 13F.

Larry Robbins cut his fund’s holding in AbbVie Inc. (NYSE:ABBV) by 2.63 million shares during the final quarter of 2015, ending the year with 13.54 million shares valued at $802.40 million. The stock of the research-based biopharmaceutical company is down by 6% since the beginning of 2016. The company’s worldwide net revenue totaled $22.9 billion for 2015, up by 15% year-over-year. The increase was mainly attributable to the sustained strength of AbbVie Inc. (NYSE:ABBV)’s primary product, HUMIRA, and the global launch of its interferon-free HCV treatment. HUMIRA accounted for roughly 61% of the company’s total net revenue in 2015. AbbVie is the top-ranked global pharmaceutical stock by Jefferies, which has a price target of $80 on the stock. Analysts at Jefferies have given the stock Top Global Pick status, citing its cheap valuation and strong catalysts in 2016. Neil Woodford’s Woodford Investment Management holds an 8.79 million-share position in AbbVie Inc. (NYSE:ABBV) as of the end of December.

Disclosure: None