Larry Robbins‘ Glenview Capital had a terrible performance last year, having lost around 17% and ranked as one of the worst-performing hedge funds, according to reports. Nevertheless, Robbins remains to be one of the most watched investors on the Street and over the years he made some pretty good calls. For example, Robbins had recommended shorting General Motors Company (NYSE:GM), before the company declared bankruptcy in 2011. Given that the investor is scheduled to appear at this year’s Sohn Investment Conference in New York, we decided to take a look at some of his positions and notable moves in the recent past to get a better idea about his favorite picks and investing style. To see who else will be among the speakers at the conference, you can read this article.
A short bio: Larry Robbins had been a trader at Leon Cooperman‘s Omega Advisors before founding Glenview in 2001. The fund returned around 300% in its first decade, even though it lost around half of its assets in 2008, but managed to recover in 2009, when it returned close to 83%. A couple of years back, Glenview was known as an activist fund and in 2013 it managed to unseat the entire board of Health Management Associates. Since then the fund has taken a less aggressive approach and prefers to work with the management and the board and provide suggestions regarding maximizing shareholder value rather than to engage in proxy fights. Glenview has been focusing on healthcare and its last 13F showed over a half of its equity portfolio allocated towards the sector. In a letter to investors, Glenview explained why it is bullish on healthcare, saying that the sector provided higher earnings every year in the last two decades and added that it focuses on healthcare equities that trade at 20% – 25% multiple discount “while generating cash and available borrowing capacity, or “dry powder” of approximately 30% of their market equity capitalization within the next two years.”
Last year, four of Glenview’s picks got into the spotlight in relation with M&A activity. In July, Aetna Inc (NYSE:AET) agreed to acquire Humana Inc (NYSE:HUM) in a $34.1 billion deal, which prices Humana at $230 per share, significantly below the current price of the stock. The deal is currently under review by federal regulators at the Justice Department. Humana Inc (NYSE:HUM) was Glenview’s largest position at the end of 2015, the fund reporting ownership of 8.25 million shares worth $1.47 billion. In Aetna Inc (NYSE:AET), the investor amassed a position containing 5.73 million shares worth $620.31 million heading into 2016.
Two other companies that announced their merger last year were CIGNA Corporation (NYSE:CI) and Anthem Inc (NYSE:ANTM). The deal worth $48 billion was announced weeks after Aetna Inc (NYSE:AET) agreed to buy Humana Inc (NYSE:HUM), which sparked a lot of talks regarding the consolidation of the health-insurance industry, which would be reduced to three leaders from five if both deals are approved by regulators. Under the terms of the deal, Anthem Inc (NYSE:ANTM) offered $103.40 in cash and 0.5152 Anthem share per CIGNA Corporation (NYSE:CI) share. Glenview held almost 7.0 million shares of CIGNA Corporation (NYSE:CI) worth $1.02 billion and 4.30 million shares of Anthem Inc (NYSE:ANTM), worth $600.16 million at the end of 2015 The stocks of all four companies have lost ground since the deals were announced, which suggests that investors have doubts that regulators would give the green light. Nevertheless, Glenview said it was pleased by the announcement of the deals and said that it considers that both deals are likely to be completed.
“In acquiring Humana, Aetna is purchasing a stronger growth business with greater organic growth (>10% top-line) in a transaction we believe will be mid-teens accretive to earnings per share in the near-term and greater than 20% accretive in the out years following synergies from each PBM operation. In acquiring Cigna, Anthem will achieve greater than 20% accretion in the near-term and as much as 30% accretion when the full PBM savings are captured late this decade. We have done extensive anti-trust analysis on each situation, and believe the odds of a completed deal between Aetna and Humana are exceedingly high, while a combination between Anthem and Cigna is highly likely to close as well,” Glenview said.
Another stock that Glenview is bullish on is HCA Holdings Inc (NYSE:HCA). At the end of 2015, the fund held 14.30 million shares (up by 160% on the quarter) worth $967.15 million. The stock has gained over 18% since the beginning of the year, although in the second half of 2015 it plunged alongside the entire healthcare sector. Nevertheless, the fund is betting on HCA and other hospital fundamentals due to their strong fundamentals and believes that their declines were due to short-term concerns rather than changes in fundamental value. Aside from HCA, other hospital operators in Glenview’s portfolio include Tenet Healthcare Corp (NYSE:THC) and Community Health Systems (NYSE:CYH).
“Companies continue to exhibit strong free cash flow and dry powder (for example, industry leader HCA, who repurchased more than 24% of its shares since its re-IPO in 2011, has more than 50% of its market capitalization in dry powder through 2017). With our hospital holdings trading at 6.5x 2017 EBITDA and approximately 9x 2017 earnings, and the coverage expansion from the ACA now proven and accepted, capital allocation opportunities abound,” Glenview said.
Aside from healthcare, Glenview is also bullish on agricultural inputs producer Monsanto Company (NYSE:MON), which represented its second-largest position containing 14.08 million shares worth $1.39 billion. Among its tech bets is Flextronics International Ltd. (NASDAQ:FLEX), in which it held 55.13 million shares.
Disclosure: none
