In this article, we will discuss 10 best healthcare stocks to buy According to Larry Robbins.
Larry Robbins is an American investor and hedge fund manager of Glenview Capital. Mr. Robbins started his career in finance at Greacher & Company after graduating from the University of Pennsylvania in 1992. He left his role at Greacher & Company after 3 years and went on to join Leon Cooperman’s Omega Advisors as a financial analyst on the fund’s U.S. equity long-short team. After serving as a financial analyst at Omega Advisors for six years, Mr. Robbins left the fund in 2000 and founded his own hedge fund, Glenview Capital. As of March 31, 2022, Larry Robbins manages more than $4.93 billion in 13F securities through his hedge fund. Moreover, according to Forbes, Mr. Robbins is worth $1.9 billion as of June 2022.
Larry Robbins’ Investment Strategies
Billionaire Larry Robbins has employed various investment strategies to acquire his fortunes. Mr. Robbins was featured in a 2007 article by The New Yorker in which he was described as a “hotshot who utilizes a variety of strategies.” Larry Robbins has focused on executing a hybrid of value and growth investment strategies and adopted a growth at a reasonable price, or GARP, investment approach toward stock investing. For Glenview Capital’s flagship fund, which he launched in 2001, Mr. Robbins employed a long-short strategy with a focus on equity and fixed-income categories. Mr. Robbins launched the Glenview Opportunity funds back in 2007. Mr. Robbins’ GO funds are modelled after an opportunistic investment approach and target underperforming and depressed companies which they hold and eventually sell at the optimal time for profits.
Glenview Capital’s Returns and Investment Portfolio
In the first quarter of 2020, Glenview Capital reported quarter-on-quarter gains of 26.43% from Q4 2019. Looking ahead at Q1 2021, Mr. Robbins’ hedge fund reported that its returns grew by 17.81% quarter-on-quarter from Q4 2020. Now in 2022, Glenview Capital’s quarter-on-quarter returns are down a negative 9.4% in Q1 2022.
However, Glenview Capital’s portfolio value increased by 5.1% in Q1 2022 to $4.94 billion, up from $4.69 billion a quarter ago. In the first quarter of 2022, Glenview Capital initiated 9 new positions and made additional purchases in 26 of its previously held securities. Billionaire Larry Robbins also dumped 6 stocks in the quarter and reduced his hedge fund’s stakes in 20 equities. The hedge fund has a top 10 holdings concentration of roughly 54.5% and has allocated a majority share of its investments to the healthcare sector.
Among Glenview Capital’s top healthcare stocks we have McKesson Corporation (NYSE:MCK), Bausch Health Companies (NYSE:BHC), and Cigna Corporation (NYSE:CI).
Larry Robbins of Glenview Capital
Our Methodology
To pick the 10 best healthcare stocks to buy according to Larry Robbins, we reviewed Larry Robbins’ Q1 2022 investment portfolio. We included Glenview Capital’s top holdings from the healthcare sector in this list and ranked them in increasing order of stake of the hedge fund. Along with each stock, we have mentioned the analyst and investor sentiment around it.
To derive the hedge fund sentiment, we consulted Insider Monkey’s database which, as of Q1 2022, keeps track of roughly 900 elite hedge funds.
Best Healthcare Stocks to Buy According to Larry Robbins
10. HCA Healthcare, Inc. (NYSE:HCA)
Glenview Capital’s Stake Value: $79,404,000
Percentage of Glenview Capital’s 13F Portfolio: 1.6%
Number of Hedge Fund Holders: 62
HCA Healthcare, Inc. (NYSE:HCA) provides health care services in the United States. As of Q1 2022, Glenview Capital’s stakes in HCA Healthcare, Inc. are valued at $79.40 million. The investment covers 1.6% of Larry Robbins’ 13F portfolio.
On June 21, RBC Capital analyst Frank Morgan trimmed his price target on HCA Healthcare, Inc. to $256 from $267 but reiterated an Outperform rating on the shares.
As of June 28, HCA Healthcare, Inc. has a trailing-twelve-month PE ratio of 8.31 and a forward dividend yield of 1.25%, which makes it an undervalued dividend-paying healthcare stock to buy according to Larry Robbins.
At the close of Q1 2022, 62 hedge funds were long HCA Healthcare, Inc. with stakes worth $2.89 billion in the company. This is compared to 66 positions in the previous quarter with stakes of $2.98 billion.
Here is what First Eagle Investment Management had to say about HCA Healthcare, Inc. in its third-quarter 2021 investor letter:
“HCA Healthcare owns and operates 185 hospitals and approximately 2,000 sites of care in the US and UK. Admissions to its facilities, depressed during the worst of the Covid-19 outbreak in 2020, have begun to rebound. HCA reported a nearly 20% year-over-year increase in admissions during the second quarter and a 14% increase in revenue, and forecast that volume would continue to improve throughout the year. We maintain our positive opinion of the company’s management team, believing them to be effective stewards of both the balance sheet and HCA’s business operations.”
9. Universal Health Services, Inc. (NYSE:UHS)
Glenview Capital’s Stake Value: $89,705,000
Percentage of Glenview Capital’s 13F Portfolio: 1.81%
Number of Hedge Fund Holders: 40
Universal Health Services, Inc. (NYSE:UHS) operates acute care hospitals, and outpatient and behavioral health care facilities. On June 16, Loop Capital analyst Joseph France initiated coverage of Universal Health Services, Inc. with a Hold rating and a $115 price target.
As of March 31, Glenview Capital owns approximately 0.61 million shares of Universal Health Services, Inc. which brings the fund’s stake in the healthcare company to $89.70 million. The investment covers 1.81% of Larry Robbins’ 13F portfolio. Glenview Capital is also the third-largest shareholder in Universal Health Services, Inc..
As of June 28, Universal Health Services, Inc. has a price-to-earnings ratio of 9.23 and a dividend yield of 0.78%. This is another undervalued dividend-paying healthcare stock to buy according to billionaire Larry Robbins.
40 hedge funds were long Universal Health Services, Inc. with stakes of $623.14 million at the close of Q1 2022. This is compared to 35 positions in the preceding quarter with stakes of $681.80 million.
Among billionaire Larry Robbins’ top healthcare stocks we have McKesson Corporation, Bausch Health Companies, and Cigna Corporation.
8. Encompass Health Corporation (NYSE:EHC)
Glenview Capital’s Stake Value: $91,414,000
Percentage of Glenview Capital’s 13F Portfolio: 1.85%
Number of Hedge Fund Holders: 48
Encompass Health Corporation (NYSE:EHC) provides facility-based and home-based post-acute healthcare services in the United States. The company operates through two business segments: Inpatient Rehabilitation, and Home Health & Hospice. Glenview Capital is the third-largest shareholder in Encompass Health Corporation.
In the first quarter of 2022, Glenview Capital raised its stakes in Encompass Health Corporation by 73%, bringing them to $91.41 million. The investment covers 1.85% of the fund’s 13F portfolio.
On June 21, Truist analyst David MacDonald lowered his price target on Encompass Health Corporation to $75 from $85 but reiterated a Buy rating on the shares.
Insider Monkey found 48 hedge funds bullish on Encompass Health Companies at the close of Q1 2022. These funds held collective stakes worth $1.14 billion in the company, up from $711.57 million in the previous quarter with 40 positions. The hedge fund sentiment for the stock is positive.
Here is what Heartland Advisors had to say about Encompass Health Companies in its fourth-quarter 2021 investor letter:
“COVID complications. Shares of many Health Care companies lagged as the continuing threat of COVID-19 dampened demand for elective medical procedures and health care providers struggled to maintain adequate staffing in the face of burnout and resistance to vaccine mandates. The Strategy’s holdings in the sector trailed the benchmark average, and the group contained a key detractor, Encompass Health Corporation (EHC).
Encompass provides inpatient rehabilitation services as well as home-based health and hospice care. Both businesses enjoy a competitive advantage over many of their peers and, we believe, are well positioned to grow organically, and acquire smaller competitors that could further economies of scale.
A labor shortage has taken a toll on sales and profit margins at Encompass as the company struggles to fill positions in a challenging environment for nursing wages and availability. Revenues have also been hurt by a slowdown in elective surgeries performed, which results in a smaller pool of patients in need of rehabilitation services.
When we took a stake in Encompass late in the summer of 2020, we recognized that COVID-related headwinds could endure longer than anticipated. However, the team believes the current challenges will eventually fade as enhanced nurse recruiting outreach helps mitigate staffing pressures while COVID-19 containment and treatment efforts gain traction. With shares producing an 8% free cash flow yield and trading at just 9x 2022 enterprise value/earnings before interest, taxes, depreciation, and amortization, we believe our patience will be rewarded.”
7. Centene Corporation (NYSE:CNC)
Glenview Capital’s Stake Value: $92,055,000
Percentage of Glenview Capital’s 13F Portfolio: 1.86%
Number of Hedge Fund Holders: 60
Centene Corporation (NYSE:CNC) operates as a multi-national healthcare company that provides programs and services to under-insured and uninsured individuals in the United States. On June 17, Centene Corporation raised its diluted EPS guidance, for fiscal year 2022, by $0.05, bringing its new forecasts to range between $5.55 and $5.70. The company also raised its fiscal year 2022 premium and service revenue guidance to a range between $134.3 billion and $136.3 billion. Centene Corporation also reported that its board of directors has authorized a $3 billion share repurchase program.
Analysts are bullish on Centene Corporation and see an upside to the stock. On June 21, Credit Suisse analyst A.J. Rice raised his price target on Centene Corporation to $88 from $86 and also upgraded the stock to Outperform from Neutral. On June 22, Deutsche Bank analyst George Hill raised his price target on Centene Corporation to $91 from $88 and reiterated a Buy rating on the shares.
As of March 31, Larry Robbins’ hedge fund has $92.05 million invested in Centene Corporation. The investment covers 1.86% of Glenview Capital’s 13F portfolio.
Centene Corporation was spotted on 60 investment portfolios at the end of Q1 2022. The total stakes of these funds in the company were valued at $2.59 billion, down from $2.60 billion a quarter ago with 53 positions.
Other healthcare stocks billionaire Larry Robbins is bullish on include McKesson Corporation, Bausch Health Companies, and Cigna Corporation.
6. AmerisourceBergen Corporation (NYSE:ABC)
Glenview Capital’s Stake Value: $116,442,000
Percentage of Glenview Capital’s 13F Portfolio: 2.35%
Number of Hedge Fund Holders: 37
AmerisourceBergen Corporation (NYSE:ABC) sources and distributes pharmaceutical products in the United States and internationally. On May 4, the company released earnings for the second quarter of fiscal year 2022. AmerisourceBergen Corporation registered an EPS of $3.22 and beat expectations by $0.30. Moreover, the company’s revenue for the quarter came in at $57.72 billion, up 17.43% year over year, and ahead of expectations by $464.03 million.
On June 1, AmerisourceBergen Corporation announced that its board of directors has authorized a $1 billion share-buyback program of the company’s outstanding shares of common stock.
Analysts are bullish on AmerisourceBergen Corporation. On June 7, Deutsche Bank analyst George Hill raised his price target on AmerisourceBergen Corporation to $178 from $167 and upgraded the stock to Buy from Hold. On June 13, UBS analyst Kevin Caliendo raised his price target on AmerisourceBergen Corporation to $174 from $144 and reiterated a Buy rating on the shares.
As of March 31, Glenview Capital’s stake in AmerisourceBergen Corporation is valued at $116.44 million. Larry Robbins’ hedge fund is the largest shareholder in the company and the investment covers 2.35% of Glenview Capital’s 13F portfolio.
At the close of Q1 2022, 37 hedge funds disclosed ownership of stakes in AmerisourceBergen Corporation. These funds held collective stakes of $766.22 million in the company, down from $1.09 billion in Q4 2021 with 43 positions.
Heartland Advisors mentioned AmerisourceBergen Corporation in its “Heartland Mid Cap Value Fund” third-quarter 2021 investor letter. Here is what the firm said:
“The ABCs of quality.AmerisourceBergen Corp. (ABC), a leading national pharmaceutical distributor, provides an example of our approach. The company has been quietly bolstering its business model during the past few years to include animal health products for the European market and an expanded line of higher-margin, value-added services that reach beyond drug distribution. During these efforts, valuations for the company have been under pressure due to liability issues stemming from opioid litigation as well as concerns about increased scrutiny of drug prices by politicians.
Our team has been following these developments and believes the strides management has made on the business side are not being fully recognized by the market. As more clarity has emerged related to opioid litigation, we’ve increased the portfolio’s stake in AmerisourceBergen and believe the investment provides the portfolio with additional exposure to a high-quality business that is well positioned to grow despite operating in a mature industry.”
5. Baxter International Inc. (NYSE:BAX)
Glenview Capital’s Stake Value: $171,444,000
Percentage of Glenview Capital’s 13F Portfolio: 3.47%
Number of Hedge Fund Holders: 45
Baxter International Inc. (NYSE:BAX) develops and provides a portfolio of healthcare products worldwide. As of March 31, Glenview Capital’s stake in Baxter International Inc. is valued at $171.44 million, up 2% from its prior stakes. The investment covers 3.47% of Larry Robbins’ 13F portfolio. Glenview Capital is also the third-largest shareholder in the healthcare company.
On May 3, Baxter Internation Inc. announced that its board of directors has declared a quarterly cash dividend of $0.29 per share, up 3.6% from its prior dividend of $0.28. The dividend is payable on July 1 to investors of record on June 3.
On June 24, JPMorgan analyst Robbie Marcus slashed his price target on Baxter International Inc. to $78 from $90 and maintained a Buy-side Overweight rating on the shares.
Insider Monkey found 45 hedge funds bullish on Baxter International Inc. at the close of Q1 2022. These funds held collective stakes worth $2.82 billion in the company, down from $3.88 billion in the previous quarter with 42 positions.
Cooper Investors mentioned Baxter International Inc. in its third-quarter 2021 investor letter, here is what the firm said:
“During the quarter we exited our position in Baxter, having originally bought in 2017 as a Low Risk Turnaround with clear Stalwart attributes. In essence, the core businesses were highly durable, providing life sustaining or saving medical products such as IV medication or pumps and dialysis machines.
They had been mismanaged prior to the company spinning off its biopharmaceutical business in 2015 which had generated most of the Baxter’s operating profit. With a new CEO in Joe Almeida, who came with a successful track record leading another medical device company (Covidien) we identified three sources of value latency for the new standalone Baxter.
Firstly, optimising the cost structure. Baxter were successful here – they were able to effectively double operating margins from low single digits to mid-to-high teens over a relatively short four-year period. Secondly, accelerating sales growth through a more focused R&D effort. This is inherently more difficult than cost optimisation and on this front success has been muted with only moderate impact to revenues from new product introductions. Finally, capital deployment through Baxter’s significantly under-levered balance sheet. Several smaller bolt-on acquisitions were nicely complementary to the existing portfolio, but in early September the company announced the acquisition of Hil-Rom Holdings, a medical device company with leading positions in bed systems and patient monitoring. The deal is significant at US$12.5bn in size, and exhausts all balance sheet latency in one fell swoop.
Whilst it is “EPS accretive” we believe the high single digit ROIC management are targeting over five years is most reflective of the financial merits of the deal. Put another way, despite visions of providing digital and connected healthcare (think a Baxter IV pump combined with a Hil-Rom smart bed), ultimately the combined entity will likely remain a low-to-mid-single digit grower. Baxter look like they are getting bigger but not necessarily better.
This combination of uncertainty around the merits of the Hil-Rom acquisition and the underwhelming performance on the product development side of the business led us to conclude that the investment proposition today is less attractive relative to other opportunities.”
4. Bausch Health Companies (NYSE:BHC)
Glenview Capital’s Stake Value: $211,515,000
Percentage of Glenview Capital’s 13F Portfolio: 4.28%
Number of Hedge Fund Holders: 48
As of this February, RBC Capital analyst Douglas Miehm has a $34 price target and Outperform rating on Bausch Health Companies. Bausch Health Companies develops, manufactures, and markets a range of pharmaceutical, medical device, and over-the-counter (OTC) products for eye health, gastroenterology, and dermatology.
On May 10, Bausch Health Companies released earnings for the fiscal first quarter of 2022. The company registered an EPS of $0.72, missing estimates by $0.30. The company’s revenue for the quarter came in at $1.92 billion, down 5.38% year over year, and was short of expectations by $121.51 million.
As of March 31, Glenview Capital owns over 9.2 million shares of Bausch Health Companies. The fund’s stakes are valued at $211.51 million, which covers 4.28% of its investment portfolio. Glenview Capital is among the top five shareholders in the company.
At the close of Q1 2022, 48 hedge funds were long Bausch Health Companies with stakes worth $3.17 billion in the company. This is compared to 53 positions in the previous quarter with stakes of $3.86 billion.
3. McKesson Corporation (NYSE:MCK)
Glenview Capital’s Stake Value: $286,550,000
Percentage of Glenview Capital’s 13F Portfolio: 5.8%
Number of Hedge Fund Holders: 59
McKesson Corporation provides healthcare services in the United States and internationally. The company has four business segments: U.S. Pharmaceutical, International, Medical-Surgical Solutions, and Prescription Technology Solutions. As of Q1 2022, Glenview Capital’s stakes in McKesson Corporation are valued at $286.55 million. The investment covers 5.8% of Larry Robbins’ 13F portfolio.
On May 31, McKesson Corporation reported that Britt Vitalone, the company’s CFO sold 27,300 shares of common stock on May 27 for a transaction of $9.1 million.
On June 7, Deutsche Bank analyst George Hill reiterated his price target of $378 on McKesson Corporation and upgraded the stock to Buy from Hold.
Insider Monkey found 59 hedge funds bullish on McKesson Corporation at the close of Q1 2022. These funds held collective stakes worth $3.79 billion in the company, up from $2.55 billion in the previous quarter with 57 positions. The hedge fund sentiment for the stock is positive.
Here is what Baron Funds had to say about McKesson Corporation in its first-quarter 2022 investor letter:
“Investments in health care distributors, health care services, and health care facilities along with cash exposure in a down market contributed to relative results. Within health care distributors, higher exposure to this strong performing sub-industry and outperformance of pharmaceutical distributor and technology solutions provider McKesson Corporation added value. McKesson was the top contributor as investors rotated into value stocks that were trading at low multiples of earnings. We continue to believe that McKesson’s stock is inexpensive in light of the company’s strong competitive position in growing end markets and earnings growth potential.”
2. Cigna Corporation (NYSE:CI)
Glenview Capital’s Stake Value: $382,417,000
Percentage of Glenview Capital’s 13F Portfolio: 7.74%
Number of Hedge Fund Holders: 63
Cigna Corporation provides insurance and related products and services in the United States. In the first quarter of 2022, Glenview Capital raised its stakes in Cigna Corporation by 44%, bringing them to $382.41 million. The investment covers 7.74% of Larry Robbins’ investment portfolio.
On June 16, Cigna Corporation announced that its board of directors has authorized an accelerated $3.5 billion share repurchase program which will allow the company to buy back shares of its common stock through agreements with Mizuho Markets Americas and Morgan Stanley.
On June 21, Morgan Stanley analyst Ricky Goldwasser raised his price target on Cigna Corporation to $296 from $283 and upgraded the stock to Overweight from Equal Weight.
At the close of Q1 2022, 63 hedge funds disclosed ownership of stakes in Cigna Corporation. The total value of these stakes amounted to $2.69 billion, up from $1.92 billion a quarter ago with 53 positions. The hedge fund sentiment around the stock is positive.
Here is what Davis Funds had to say about Cigna Corporation in its fourth-quarter 2021 investor letter:
“Healthcare is included in the portfolio both for company-specific reasons, as well as big picture trends. At the company level, we hold select companies in pharmaceuticals, healthcare services and health insurance at attractive valuations. This is at a time when the average age of the U.S. population is fast approaching 40, older than Asia-Pacific and a little younger than the aged populations of Europe and Japan. The number of seniors in the U.S.—i.e., 65 years or older— now surpasses 54 million, or about 15% of the population. Seniors, on average, take a much greater number of medications and account for a large and disproportionate share of healthcare spending, and we expect that trend to continue due to both raw demographics and a proliferation in the number of available treatments and services available now, the latter being driven by innovation and investment in the healthcare industry. Representative holdings in the Fund include Cigna, United Health Group, Viatris and Quest Diagnostics.”
1. Tenet Healthcare Corporation (NYSE:THC)
Glenview Capital’s Stake Value: $548,514,000
Percentage of Glenview Capital’s 13F Portfolio: 11.1%
Number of Hedge Fund Holders: 55
Tenet Healthcare Corporation (NYSE:THC) operates as a diversified healthcare services company. The company has three business segments: Hospital Operations, Ambulatory Care, and Conifer. As of June 27, Tenet Healthcare Corporation has a trailing twelve-month PE ratio of 6.33, which makes it one of the best undervalued healthcare stocks to buy now according to billionaire Larry Robbins.
Analysts are bullish on Tenet Healthcare Corporation. On June 3, Raymond James added the company to its “Analyst Current Favorites” list, which includes stocks that are Buy rated. On June 16, Loop Capital analyst Joseph France initiated coverage of Tenet Healthcare Corporation with a Buy rating and an $80 price target.
As of March 31, Glenview Capital owns 6.3 million shares of Tenet Healthcare Corporation which brings the fund’s stakes to $548.51 million. The investment covers 11.1% of Larry Robbins’ 13F portfolio. Glenview Capital is the largest shareholder in Tenet Healthcare Corporation as of Q1 2022.
Tenet Healthcare Corporation was spotted on 55 investment portfolios at the end of Q1 2022. The total stakes of these funds in the company were valued at $2.0 billion, down from $2.15 billion a quarter ago with 49 positions.
Oakmark Funds mentioned Tenet Healthcare Corporation in its third-quarter 2021 investor letter, here is what the firm had to say:
“Tenet may be best known as the second-largest public hospital chain in the U.S., but its largest business is outpatient acute care centers. In early 2020, investors fled the health care industry because of the great uncertainty that the pandemic presented. The early days of the pandemic were very hard on the hospital industry especially, but as the Covid-19 surge peaked and diminished, hospitals were able to schedule elective procedures and engage in profitable activities.”
You can also take a look at 10 Healthcare Dividend Stocks that Hedge Funds are Buying and 10 Healthcare Stocks to Buy According to Mario Gabelli.
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This article is originally published at Insider Monkey.
