Prior to establishing Glenview Capital in 2001 Larry Robbins (pictured) was a trader at the veteran investor Leon Cooperman‘s Omega Advisors. A cursory look at their latest 13F portfolios reveals that an association between the two still persists and the funds have a similar outlook when it comes to investment prospects of Allergan PLC (NYSE:AGN), eBay Inc (NASDAQ:EBAY), American International Group Inc (NYSE:AIG), Sunedison Inc (NYSE:SUNE), and Citigroup Inc (NYSE:C).
Glenview is a larger concern than Omega as the market value for its public equity portfolio stood at $21.90 billion at the end of March, as compared to $6.27 billion for Omega. While the healthcare sector represented 36% of Glenview’s holdings, the finance sector formed a majority of Omega’s portfolio at 26%.
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Why do we pay attention to hedge fund sentiment? Most investors ignore hedge funds’ moves because as a group their average net returns trailed the market since 2008 by a large margin. Unfortunately, most investors don’t realize that hedge funds are hedged and they also charge an arm and a leg, so they are likely to underperform the market in a bull market. We ignore their short positions and by imitating hedge funds’ stock picks independently, we don’t have to pay them a dime. Our research have shown that hedge funds’ long stock picks generate strong risk adjusted returns. For instance the 15 most popular small-cap stocks outperformed the S&P 500 Index by an average of 95 basis points per month in our back-tests spanning the 1999-2012 period. We have been tracking the performance of these stocks in real-time since the end of August 2012. After all, things change and we need to verify that back-test results aren’t just a statistical fluke. We weren’t proven wrong. These 15 stocks managed to return more than 145% over the last 34 months and outperformed the S&P 500 Index by 85 percentage points (see the details here).
Formerly known as Actavis, Allergan PLC (NYSE:AGN) occupied the top spot in Omega’s portfolio with some 933,500 shares valued at $277.82 million. The holding represented 4.43% of the fund’s portfolio. Glenview increased its holding in the $120 billion specialty pharmaceutical company by 7% during the first quarter to 1.98 million shares valued at $590.09 million. So far this year, Allergan PLC (NYSE:AGN)’s stock has appreciated by almost 20%, and it was also the most popular company among the hedge funds that we track, by the end of the March quarter. Andreas Halvorsen‘s Viking Global is the largest stockholder of Allergan PLC (NYSE:AGN) holding 6.11 million shares valued at $1.82 billion. Larry Robbins sees a nearly 50% upside in Allergan shares over the next 18 months. Here is what Robbins said about AGN in a recent investor letter:
“Given the highly accretive Allergan acquisition, management has increased their 2017 EPS goal to $25 per share, and we see a number of upside levers that could drive EPS as high as $27. Given that the combined company has a faster-growing, higher-margin, and more durable business, we think it merits a higher P/E multiple of 15-17x, implying nearly 50% upside over the next 18 months. And lastly, while we clearly like the organic growth story, we do think a potential acquisition by Pfizer remains a possibility over the medium-term, and regard it as a call option on our investment.”
Both Cooperman and Robbins were bearish on eBay Inc (NASDAQ:EBAY) during the first trimester. While the former reduced its holding in the company by 47% to 1.84 million shares valued at $106.30 million, the latter cut his fund’s exposure to the company by 21%, taking the total stake to 7.67 million shares valued at $442.65 million. The stock of the $74.15 billion technology company has appreciated by 8.76% year-to-date. It was recently announced that eBay Inc (NASDAQ:EBAY)’s much anticipated spinoff of PayPal will occur in July with shares of the payment company starting to trade on the 20th. Icahn Capital Lp, the activist hedge fund of the renowned investor Carl Icahn, who lost a battle with the eBay Inc (NASDAQ:EBAY)’s management early last year when he purported the spinoff idea, is also the company’s largest stockholder within our database owning some 46.27 million shares valued at $2.67 billion.
Glenview was more bullish on American International Group Inc (NYSE:AIG) than Omega as it increased its stake in the $83.64 billion insurance company by 18% during the first three months to 6.52 million shares valued at $357.46 million as compared with Omega’s 3% reduction in the holding to 3.87 million shares valued at $212.29 million. The 12% upward march of American International Group Inc (NYSE:AIG)’s stock this year has rewarded Robbins for his optimism. Among the company’s stockholders that we track, Bruce Berkowitz’s Fairholme is the largest with 23.87 million shares valued at $1.31 billion.
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Another company that the two money managers had a slight difference of opinion was Sunedison Inc (NYSE:SUNE) as Glenview raised its stake in the company by 13% during the first three months to 11.96 million shares valued at $287.04 million, while Omega trimmed its stake by 2% to 8.80 million shares valued at $211.12 million. The stock price is up by a staggering 61% so far this year. David Einhorn’s Greenlight Capital heads the list of Sunedison Inc (NYSE:SUNE)’s shareholders in our database holding 24.95 million shares valued at $598.89 million.
While Omega increased its holding in Citigroup Inc (NYSE:C) by 1% to 4.30 million shares valued at $277.82 million during the first trimester, Glenview initiated a stake in the bank holding company with about 5.37 million shares valued at $276.42 million. The stock is up by a modest 4.12% year-to-date. Boykin Curry’s Eagle Capital Management is the largest stockholder of Citigroup Inc (NYSE:C) among those we track, owning some 26.35 million shares valued at $1.36 billion.
Disclosure: None
