In this article, we discuss the 10 best healthcare stocks to buy according to Matthew Halbower’s Pentwater Capital Management.
Matthew Halbower is the Chief Executive Officer, Chief Information Officer and portfolio manager of Pentwater Capital Management, a private investment firm based in Naples, Florida. With over 18 years of industry experience, Matthew Halbower worked as the portfolio manager of event-driven trading and distressed securities at Deephaven Capital Management, founded the Deephaven Event Fund, and worked as the portfolio manager at Citadel Investment Group, prior to launching Pentwater Capital in 2007. He holds a B.S in Electrical Engineering from Massachusetts Institute of Technology and a J.D from Harvard Law School.
Matthew Halbower’s manages over $12.11 billion in assets through his hedge fund, Pentwater Capital Management, investing in fixed income, hedging and public equity markets on a global scale. The fund invests heavily in the consumer discretionary sector, as well as healthcare, finance and energy sectors, in order of decreasing asset allocations. The fund caters mainly to pooled investment vehicles, which make up three quarters of its base, while also providing services to corporations and other businesses.
Some of the top stocks present in the investment portfolio of Pentwater Capital Management at the end of the second quarter of 2021 include IHS Markit Ltd. (NYSE:INFO), PG&E Corporation (NYSE:PCG), Alibaba Group Holding Limited (NYSE:BABA) and Baidu, Inc. (NASDAQ:BIDU), among others.
Matthew Halbower of Pentwater Capital Management
Our Methodology
Why should we pay attention to Halbower’s stock picks? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
With this context and industry outlook in mind, let us now look towards the 10 healthcare stocks to buy according to Matthew Halbower’s Pentwater Capital Management. We made use of Pentwater Capital Management’s 13F portfolio for the second quarter for this analysis.
Best Healthcare Stocks to Buy According to Matthew Halbower’s Pentwater Capital Management
10. Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN)
Halbower’s Stake Value: $3.36 million
Percentage of Matthew Halbower’s 13F Portfolio: 0.02%
Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) is involved with the discovery, invention, development and commercialization of medicines for treating various medical conditions worldwide, including macular degeneration and diabetic macular edema. Ranked 10th on the list of the 10 best healthcare stocks to buy according to Matthew Halbower’s Pentwater Capital Management, Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) has a market capitalization of $69.72 billion.
Matthew Halbower’s Pentwater Capital Management currently owns 6,500 shares of Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN), amounting to $3.63 million in worth and accounting for 0.02% of the fund’s portfolio. Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) last released their quarterly earnings report for the second quarter of 2021 on August 5, 2021, with reported earnings per share at $25.80, surpassing estimates of $17.71 by $8.09. The company also reported quarterly revenues of $5.14 billion, beating consensus estimated revenues by $1.17 billion.
Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) was in 48 hedge fund portfolios at the end of the first half of 2021, compared to 39 funds in the previous quarter. Regeneron Pharmaceuticals, Inc. (NASDAQ: REGN) delivered a 33.45% return in the past 3 months. Out of the hedge funds being tracked by Insider Monkey, the Paris-based investment fund Harris Associates is a leading shareholder in Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) with 1.44 million shares worth more than $807 million.
In the Q2 2021 investor letter of Bronte Capital, the fund mentioned Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN). Here is what the fund said:
“Regeneron is a large and successful biotech company whose revenue is largely dependent on one drug (Eylea) whose exclusivity runs out in 2024-25.
Eylea is a treatment for wet macular degeneration, the most common cause of blindness in old people. It cannot cure blindness, but it can, with monthly injections, stop eyesight deteriorating. These monthly injections are alas in the eye which sounds worse than it is. (There are no nerve endings, so it is frightening but painless.)
Blindness has very nasty social and economic consequences. Large avoided-costs (the cost of looking after blind old people) allows Regeneron to charge a lot for Eylea. Eylea is – for example – the biggest single draw on the Australian Pharmaceutical Benefits Scheme. The relatively short-dated patent for Eylea is the reason Regeneron trades at a low earnings multiple. (It is roughly 10-12 times earnings at the price we bought it.) But it is not for Eylea you own Regeneron. The real reason for owning the stock is the platform that Regeneron has in mouse genetics.
Regeneron has a process for rapidly and accurately genetically modifying mice. They have mice that have, for instance, largely human immune systems. Humanized mice sound like science fiction, but we assure you that they are commonplace now and there are thousands of different variants.
Humanized mice are profoundly useful in drug development. For instance, you can give humanized mice COVID-19 and you can find the mice that are preferentially good at fighting the disease. What this means is that the mice develop antibodies which are key to fighting disease. And as these are humanized mice they are (with minor caveats) effectively human antibodies.
The company then has to find the cells that produce those antibodies, clone those cells into Chinese hamster ovary cells (a standard stem cell line) and mass produce the antibodies as drugs.
These drugs – on the evidence so far – work pretty well. The “experimental” COVID drug that was given to Donald Trump when he was very sick was developed this way. When the former President received the drug, it was not yet able to be mass produced, as it now can be. And it works, though it is far more effective in reducing the length of hospital stays than in reducing actual deaths. [The average reduction in hospital stays is about 4 days, the
reduction in mortality amongst hospitalized patients is about 10 percent.]The tell here though is that they were so confident that the drug worked and was likely to be safe that they gave an experimental drug to the President of the United States. That reflects amazing confidence in the platform.
The platform can be used to develop treatments for a wide range of human diseases. Regeneron operate a highly automated genetics facility which has sequenced and linked the electronic health records of more than 1.5 million people across the Geisinger Health System and the UK Biobank.
In a project that redefines what is meant by “big data” they are correlating genetics to disease prevalence. They will then modify mice to predispose the mice to human diseases and hopefully mass produce fully human antibodies to those diseases. This platform may generate dozens of drugs for a very wide range of currently difficult to treat diseases.
Regeneron will prove an attractive holding if:
• Eylea has a long post-patent life (a distinct possibility as doctors will be conservative about switching to a biosimilar drug injected into the eyes); and
• Dupixent – a modest blockbuster drug partly owned by Sanofi – produces sales at the low end of estimated ranges. It will be a multi-bagger stock from here if, additionally, they develop half a dozen new drugs from the mouse platform.
This is a growth stock and an important one, but it is rare that one of these comes into a price range we consider worthy of a full-sized position.”
9. Option Care Health, Inc. (NASDAQ:OPCH)
Halbower’s Stake Value: $4.11 million
Percentage of Matthew Halbower’s 13F Portfolio: 0.03%
Option Care Health, Inc. (NASDAQ:OPCH) offers home and alternate site infusion services in the United States. The company provides immunoglobulin infusion therapies for the treatment of immune deficiencies, home infusion services to treat heart failures, as well as treatments for chronic inflammatory disorders. Ranked 9th on the list of the 10 best healthcare stocks to buy according to Matthew Halbower’s Pentwater Capital Management, Option Care Health, Inc. (NASDAQ:OPCH) has a market capitalization of $4.63 billion.
Matthew Halbower’s Pentwater Capital Management currently holds 188,122 shares of Option Care Health, Inc. (NASDAQ:OPCH), amounting to over $4.11 million in worth and amounting to 0.03% of the fund’s portfolio. The company last issued its quarterly earnings report for the second quarter of 2021 on August 3, 2021, with reported earnings per share at $0.18, beating estimated earnings per share by $0.09. The company also reported quarterly revenues of $860.27 million, surpassing forecast estimates by $76.35 million.
Out of the hedge funds being tracked by Insider Monkey, the California-based investment fund Park West Asset Management is a leading shareholder in Option Care Health, Inc. (NASDAQ:OPCH) with 6.02 million shares worth more than $131.8 million.
Just like Just like IHS Markit Ltd. (NYSE:INFO), PG&E Corporation (NYSE:PCG), Alibaba Group Holding Limited (NYSE:BABA) and Baidu, Inc. (NASDAQ:BIDU), Option Care Health, Inc. (NASDAQ:OPCH) is a notable stock in Matthew Halbower’s portfolio.
8. Tela Bio, Inc. (NASDAQ:TELA)
Halbower’s Stake Value: $4.86 million
Percentage of Matthew Halbower’s 13F Portfolio: 0.04%
Tela Bio, Inc. (NASDAQ:TELA) is a commercial stage medical technology company that focuses on the design, development and marketing of tissue reinforcement materials for soft tissue reconstruction in patients. Ranked 8th on the list of the 10 best healthcare stocks to buy according to Matthew Halbower’s Pentwater Capital Management, Tela Bio, Inc. (NASDAQ:TELA) has a market capitalization of $197.11 million.
Matthew Halbower’s Pentwater Capital Management currently holds 301,834 shares of Tela Bio, Inc. (NASDAQ:TELA), amounting to $4.86 million in worth and representing 0.04% of the fund’s portfolio. On August 8, the company released its quarterly earnings report for the second quarter of 2021, with reported earnings per share at -$0.57, missing the estimates of -$0.52 by $0.05. The company also reported a revenue of $7.56 million, surpassing estimates by $1.25 million.
Just like Just like IHS Markit Ltd. (NYSE:INFO), PG&E Corporation (NYSE:PCG), Alibaba Group Holding Limited (NYSE:BABA) and Baidu, Inc. (NASDAQ:BIDU), Tela Bio, Inc. (NASDAQ:TELA) is a notable stock in Matthew Halbower’s portfolio.
7. Magellan Health, Inc. (NASDAQ:MGLN)
Halbower’s Stake Value: $4.87 million
Percentage of Matthew Halbower’s 13F Portfolio: 0.04%
Magellan Health, Inc. (NASDAQ:MGLN) is a healthcare company that manages fast growing, complex areas of health, including special populations, pharmacy benefits and other specialty areas of healthcare. Ranked 7th on the list of the 10 best healthcare stocks to buy according to Matthew Halbower’s Pentwater Capital Management, Magellan Health, Inc. (NASDAQ:MGLN) has a market capitalization of $2.49 billion.
Matthew Halbower’s Pentwater Capital Management currently holds 51,708 shares of Magellan Health, Inc. (NASDAQ:MGLN), worth over $4.87 million and accounting for 0.04% of the fund’s portfolio. The company last issued its quarterly earnings report for the second quarter of 2021 on August 5, 2021, with reported earnings per share at -$0.03, falling short of the estimates by -$0.64. The company also reported revenues of $1.22 billion, beating estimated revenues by $77.10 million.
Out of the hedge funds being tracked by Insider Monkey, the New York-based investment fund Starboard Value LP is a leading shareholder in Magellan Health, Inc. (NASDAQ:MGLN) with 2.36 million shares worth more than $223 million.
Just like IHS Markit Ltd. (NYSE:INFO), PG&E Corporation (NYSE:PCG), Alibaba Group Holding Limited (NYSE:BABA) and Baidu, Inc. (NASDAQ:BIDU), Magellan Health, Inc. (NASDAQ:MGLN) is a notable stock in Matthew Halbower’s portfolio.
6. Esperion Therapeutics, Inc. (NASDAQ:ESPR)
Halbower’s Stake Value: $6.11 million
Percentage of Matthew Halbower’s 13F Portfolio: 0.05%
Esperion Therapeutics, Inc. (NASDAQ:ESPR) is a Michigan-based pharmaceutical company that focuses on developing and commercializing oral therapies for the treatment of patients with elevated low-density lipoprotein cholesterol and cardiovascular disease. Ranked 6th on the list of the 10 best healthcare stocks to buy according to Matthew Halbower’s Pentwater Capital Management, Esperion Therapeutics, Inc. (NASDAQ:ESPR) has a market capitalization of $353.19 million.
Matther Halbower’s Pentwater Capital Management currently holds 289,183 shares of Esperion Therapeutics, Inc. (NASDAQ:ESPR), amounting to $6.11 million and representing 0.05% of the fund’s portfolio. On August 3, the company issued its quarterly earnings report for the second quarter of 2021, with reported earnings per share at -$1.67, beating estimates of -$1.85 by $0.18. The company also reported revenues of $40.66 million, missing the estimated revenues by -$1.52 million.
Out of the hedge funds being tracked by Insider Monkey, Australia-based investment firm Platinum Asset Management is a leading shareholder in Esperion Therapeutics, Inc. (NASDAQ: ESPR) with over 1.7 million shares worth more than $36.23 million.
5. Karuna Therapeutics, Inc. (NASDAQ:KRTX)
Halbower’s Stake Value: $7.7 million
Percentage of Matthew Halbower’s 13F Portfolio: 0.06%
Karuna Therapeutics, Inc. (NASDAQ:KRTX) is a clinical-stage biopharmaceutical company that is focused on the development and marketing of transformative medicines for patients with psychiatric and neurological conditions. Ranked 5th on the list of the 10 best healthcare stocks to buy according to Matthew Halbower’s Pentwater Capital Management, Karuna Therapeutics, Inc. (NASDAQ:KRTX) has a market capitalization of $3.49 billion.
Matthew Halbower’s Pentwater Capital Management currently holds 68,200 shares in Karuna Therapeutics, Inc. (NASDAQ:KRTX), worth $7.77 million and accounting for 0.06% of the fund’s total portfolio value. On August 5, the company issued its quarterly earnings report for the second quarter of 2021, with reported earnings per share at -$1.17, surpassing forecast estimates of -$1.40 by $0.23.
Out of the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Viking Global is a leading shareholder in Karuna Therapeutics, Inc. (NASDAQ:KRTX) with over 822,465 shares worth more than $93.75 million.
In their Q1 2021 Investor Letter, Miller Value Partners highlighted a few stocks and Karuna Therapeutics Inc. (NASDAQ:KRTX) is one of them. Here is what the fund said:
“Karuna Therapeutics is a biotech company we got to know through our holding in PureTech Health, which founded Karuna. Karuna is unique in that the main asset it has developed is largely de-risked since it’s a reformulated drug where there’s ample historical data. The company has a Phase 3 trial in schizophrenia psychosis. This indication has a large unmet need, with about two-thirds of patients either inadequately treated. We think the company has the potential to be worth about double where the stock is trading ($117).”
4. Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX)
Halbower’s Stake Value: $9.2 million
Percentage of Matthew Halbower’s 13F Portfolio: 0.07%
Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX) is a clinical-stage biotechnology company that industrializes drug discoveries by integrating technological innovations across biology and chemistry. Ranked 4th on the list of the 10 best healthcare stocks to buy according to Matthew Halbower’s Pentwater Capital Management, Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX) has a market capitalization of $4.52 billion.
Matthew Halbower’s Pentwater Capital Management currently holds 252,500 shares of Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX), amounting to $9.21 million in worth and accounting for 0.07% of the fund’s portfolio. On August 13, the company released its quarterly earnings report, with reported earnings per share at -$0.31, missing estimates by -$0.07.
Out of the hedge funds being tracked by Insider Monkey, the investment firm MIC Capital Partners is a leading shareholder in Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX), with over 1.38 million shares worth more than $50.69 billion.
In the Q2 2021 Investor Letter, Baron Discovery Fund highlighted a few stocks and Recursion Pharmaceuticals Inc. (NASDAQ:RXRX) is one of them. Here is what the fund had to say:
“Recursion Pharmaceuticals, Inc. is a biotechnology company engaged in technology-enabled drug discovery. The company uses automated wet-lab infrastructure (actual biologic experimentation) with cell perturbations (multiple experiments done on the duplicate cells), and image capture to generate data at large scale. It also operates its own supercomputer (the “BioHive”) to drive “in-silico” (virtual, software-enabled) inferences based on its data and wet-lab experiments. This combined approach has generated a strong pipeline of programs spanning early discovery to clinical trials, including a collaboration deal with Bayer. The company’s use of artificial intelligence and machine learning lowers the cost of drug discovery and speeds up time to market, and we believe this paradigm is in the early innings of disrupting the entire biopharmaceutical industry. Since Recursion’s program pipeline is still relatively early stage, we have started with a small investment.”
3. Poseida Therapeutics, Inc. (NASDAQ:PSTX)
Halbower’s Stake Value: $49.7 million
Percentage of Matthew Halbower’s 13F Portfolio: 0.41%
Poseida Therapeutics, Inc. (NASDAQ:PSTX) is a clinical-stage biopharmaceutical company that focuses on the development of therapeutics for patients with high unmet medical needs. Ranked 3rd on the list of the 10 best healthcare stocks to buy according to Matthew Halbower’s Pentwater Capital Management, Poseida Therapeutics, Inc. (NASDAQ:PSTX) has a market capitalization of $498.71 million.
Matthew Halobwer’s Pentwater Capital Management currently owns more than 4.96 million shares of Poseida Therapeutics, Inc. (NASDAQ:PSTX) amounting to $49.77 million in worth and representing 0.41% of the fund’s total portfolio. Poseida Therapeutics, Inc. (NASDAQ:PSTX) last released their quarterly earnings for the second quarter of 2021 on August 12, with reported earnings per share at -$0.74, missing the estimated earnings per share of -$0.64 by $0.10.
Out of the hedge funds being tracked by Insider Monkey, Boston-based investment firm Adage Capital Management is a leading shareholder in Poseida Therapeutics, Inc. (NASDAQ:PSTX) with over 1.27 million shares worth more than $12.77 million.
2. Change Healthcare Inc. (NASDAQ:CHNG)
Halbower’s Stake Value: $207,487,000
Percentage of Matthew Halbower’s 13F Portfolio: 1.71%
Change Healthcare Inc. (NASDAQ:CHNG) is an independent healthcare technology company that provides data and analytics-driven solutions to enhance clinical, financial and administrative outcomes in the United States healthcare system. Ranked 2nd on the list of the 10 best healthcare stocks to buy according to Matthew Halbower’s Pentwater Capital Management, Change Healthcare Inc. (NASDAQ:CHNG) has a market capitalization of $6.79 billion.
Matthew Halbower’s Pentwater Capital Management currently owns 9 million shares of Change Healthcare Inc. (NASDAQ:CHNG), worth more than $207.48 million and representing 1.71% of the fund’s portfolio. Change Healthcare Inc. (NASDAQ:CHNG) issued their quarterly earnings report for the second quarter of 2021 on August 4, with reported earnings per share at $0.41, falling short of estimates by $0.03. The company also reported quarterly revenues of $867.86 million, beating consensus estimated revenues by $10.28 million.
Out of the hedge funds being tracked by Insider Monkey, Boston-based investment firm Abrams Capital Management is a leading shareholder in Change Healthcare Inc. (NASDAQ:CHNG) with over 13.9 million shares worth more than $321 million.
1. Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN)
Halbower’s Stake Value: $906.27 million
Percentage of Matthew Halbower’s 13F Portfolio: 7.47%
Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) is an American pharmaceutical company that focuses on patients affected by rare diseases. The Boston-based company is ranked 1st on the list of the 10 best healthcare stocks to buy according to Matthew Halbower’s Pentwater Capital Management.
Matthew Halbower’s Pentwater Capital Management currently owns 4.9 million shares of Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), amounting to $906.27 million in worth and accounting for 7.47% of the fund’s portfolio. In the second quarter of 2021, Pentwater Capital Management increased its activity in Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN) by 16%.
Due to its acquisition by AstraZeneca PLC (NASDAQ:AZN) on June 6, Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) began working on immunoregulatory compounds for rare diseases, especially conditions involving immune systems.
As of Q2 2021, 69 hedge funds have positions in Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), worth over $10 billion. Out of the hedge funds being tracked by Insider Monkey, California-based investment firm Farallon Capital is a leading shareholder in Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) with over 7.7 million shares worth more than $1.4 billion.
ClearBridge Investments, an investment management firm, in its Q1 2021 investor letter, mentioned Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN). Here is what the fund said:
“We also sold biotechnology holding Alexion Pharmaceuticals ahead of its acquisition by AstraZeneca but expect to redouble our efforts in health care through the rest of the year. We see good growth potential in the sector and after full due diligence, have been busy populating our wish list with new names we would like to own.”
You can also take a look at 10 Best Dividend Aristocrats to Buy According to Hedge Funds and 10 Best Dividend Stocks to Buy According to John Khoury’s Long Pond Capital.
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Disclosure: None. 10 Best Healthcare Stocks to Buy According to Matthew Halbower’s Pentwater Capital Management is originally published on Insider Monkey.
