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Pfizer Inc. (PFE), Merck & Co., Inc. (MRK): Mid-Sized Hedgie Focusing On Big Pharma

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By law, institutional investors with over $100 million in investment discretion in Section 13(f), are required within 45 days after the end of a calendar quarter to file the 13F form with the SEC. The 13F form discloses all of the US-listed publicly traded holdings in a fund’s equity portfolio. One of the most recent filings belongs to London-based RWC Asset Management LLP. Reading on will take you through five of the largest picks from the 13F filing of RWC. Highlights include Pfizer Inc. (NYSE:PFE), Merck & Co., Inc. (NYSE:MRK), and Eli Lilly & Co. (NYSE:LLY).

Why it is important?

Our selection of the top five positions in RWC’s portfolio is crucial, because studies have shown that average investors can benefit from tracking a hedge fund’s sentiment. According to our research, those who follow the funds we track can outperform the market by as much as 18 percentage points a year.

Pfizer Inc. (NYSE:PFE)

A top trio

RWC Asset Management decreased the position in Pfizer Inc. (NYSE:PFE) to 636,832 shares, versus 767,085 shares in its last filing. However, the value of the stake increased to $23.2 million, from $19.2 million in the fourth quarter. For the first quarter of 2013, Pfizer Inc. (NYSE:PFE) posted a revenue smaller by 9% on the year to $13.5 billion, however, net income increased by 53% to $2.8 billion. The pharma giant’s diluted EPS advanced by 58% year-on-year to $0.38. Pfizer Inc. (NYSE:PFE)’s CEO Ian Read said in a statement: “As we begin 2013, we continue to generate attractive returns for our shareholder,” and Mr. Market has agreed in earnest. Pfizer’s stock price has popped 16.7% since the start of the year.

In Merck & Co., Inc. (NYSE:MRK), the fund also expanded its position by 102,045 shares. RWC currently owns 500,134 shares, the value of the stake being about $22.5 million, up from $16.3 million at the end of December. The year-to-date return of Merck & Co., Inc. (NYSE:MRK) is 11.7%. The company posted almost $10.7 billion in sales in the first quarter, down from $11.7 billion in the first quarter of the last year. Merck & Co., Inc. (NYSE:MRK)’s EPS also fell to $0.52 from $0.56 a year ago. According to our database, nearly 60 of the 450 hedge funds we track held positions in Merck & Co., Inc. (NYSE:MRK) heading into 2013, third among the major pharmaceutical companies behind Pfizer (77) and Johnson & Johnson (NYSE:JNJ)’s 67-fund mark.

Eli Lilly & Co. (NYSE:LLY) is the last in the top 3 picks of RWC. The fund added 45,334 shares to the position, and the value of the stake surged to 22.4 million, from $17.3 million. Eli Lilly & Co. (NYSE:LLY) posted a flat revenue in the first quarter of $5.6 billion, while the net income jumped by 53% to almost $1.55 billion. Earnings per share increased by 56% on the year to $1.42, and the year-to-date return of Eli Lilly & Co. (NYSE:LLY)’s stock is 10.91%. More than 50 hedge funds were invested in the company, according to our database.

A good pick

Johnson & Johnson (NYSE:JNJ)‘s position in RWC Asset Management’s portfolio almost doubled, the current holding amounting to 213,860 shares, the value of the stake being $17.5 million, compared to the previous stake of 114,454 shares worth about $8.0 million. Shares have returned 21.48% since the start of the year. For the first quarter of 2013, Johnson & Johnson (NYSE:JNJ) reported sales of $17.5 billion, which is 8.5% higher compared to the first quarter of the previous year. Net earnings for the quarter totalled $3.5 billion, and diluted EPS amounted to $1.22. The earnings guidance of Johnson & Johnson (NYSE:JNJ) for the whole year is between $5.35 and $5.45 per share. The company also announced that it has increased the quarterly dividend rate by 8.2% to $0.66 per share.

A tech play out of left field

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