In this article, we discuss the 10 healthcare stocks to buy according to billionaire DE Shaw based on Q3 holdings of his fund.
David Elliot Shaw is a wealthy American scientist and hedge fund manager. Shaw received a bachelor’s degree summa cum laude from the University of California, San Diego, and a Ph.D. from Stanford University in 1980 before joining Columbia University’s computer science department as an assistant professor. Shaw made his fortune by utilizing cutting-edge high-speed computer networks to exploit inefficiencies in financial markets.
D E Shaw is a New York-based worldwide investment management hedge fund created in 1988 by David E. Shaw. It is one of the oldest hedge funds and one of the first to apply complicated mathematical trading algorithms. In 1996, Fortune magazine called the billionaire “King Quant” for his hedge fund’s pioneering role in high-speed quantitative trading.
D E Shaw has stakes in Johnson & Johnson (NYSE:JNJ), Pfizer Inc. (NYSE:PFE), and Thermo Fisher Scientific Inc. (NYSE:TMO), among many other companies, as of the third quarter of 2021.
David E. Shaw of D.E. Shaw
Let’s start our list of 10 healthcare stocks to buy according to billionaire D E Shaw. We used Shaw’s fund’s 13F portfolio for Q3 2021 for this analysis.
Healthcare Stocks to Buy According to Billionaire D E Shaw
10. Cardinal Health, Inc. (NYSE:CAH)
D E Shaw Stake Value: $126,064,000
Percentage of D E Shaw’s 13F Portfolio: 0.11%
Number of Hedge Fund Holders: 36
Cardinal Health, Inc. (NYSE:CAH) is a health-care services corporation that supplies pharmacies, hospitals, surgical centers, and physician offices with medications and other medical items.
D E Shaw cut its stake in Cardinal Health, Inc. (NYSE:CAH) by 11% in the third quarter. The fund still owns a $126 million stake in the company.
In the third quarter of 2021, the number of hedge funds that held stakes in Cardinal Health, Inc. (NYSE:CAH) was 36 out of 867 hedge funds tracked by Insider Monkey.
Like Johnson & Johnson (NYSE:JNJ), Pfizer Inc. (NYSE:PFE), and Thermo Fisher Scientific Inc. (NYSE:TMO), Cardinal Health, Inc. (NYSE:CAH) is one of the healthcare stocks gaining the attention of billionaire D E Shaw.
9. The Procter & Gamble Company (NYSE:PG)
D E Shaw Stake Value: $136,397,000
Percentage of D E Shaw’s 13F Portfolio: 0.12%
Number of Hedge Fund Holders: 69
The Procter & Gamble Company’s (NYSE:PG) branded consumer packaged products serve consumers throughout North and Latin America, Europe, Asia Pacific, Greater China, India, the Middle East, and Africa. Grooming, Beauty, Health Care, Fabric & Home Care, and Baby, Feminine & Family Care are the five segments in which it works.
In October, Deutsche Bank analyst Steve Powers decreased his price objective on The Procter & Gamble Company (NYSE:PG) to $160 from $163 and maintained a “Buy” rating. According to Powers, The Procter & Gamble Company’s (NYSE:PG) Q1 results fell short of expectations.
Overall, hedge funds are loading up on The Procter & Gamble Company (NYSE:PG), as 69 out of the 867 funds tracked by Insider Monkey held stakes in the company, compared to 68 funds a quarter earlier. Andy Brown’s Cedar Rock Capital is the most significant stakeholder in The Procter & Gamble Company (NYSE:PG), with 7.41 million shares worth $1.04 billion.
8. Medtronic plc (NYSE:MDT)
D E Shaw Stake Value: $157,045,000
Percentage of D E Shaw’s 13F Portfolio: 0.14%
Number of Hedge Fund Holders: 62
Medtronic plc (NYSE:MDT) is a medical technology firm that creates, manufactures, distributes, and sells device-based medical therapies and services.
In November, Truist analyst David Rescott lowered his price target on Medtronic plc (NYSE:MDT) to $142 from $148 but kept a “Buy” rating on the shares.
D E Shaw started building its position in Medtronic plc (NYSE:MDT) in the second quarter of 2015 and currently manages over 1.25 million shares in the company, valued at $157.05 million. The company represents 0.14% of the hedge fund’s 13F portfolio. In the third quarter of 2021, 62 hedge funds in the database of Insider Monkey held stakes worth $2.28 billion in Medtronic plc (NYSE:MDT).
7. Illumina, Inc. (NASDAQ:ILMN)
D E Shaw Stake Value: $165,830,000
Percentage of D E Shaw’s 13F Portfolio: 0.14%
Number of Hedge Fund Holders: 55
Illumina, Inc. (NASDAQ:ILMN) develops, manufactures, and sells life science instruments and systems for large-scale genetic variation and function investigation.
In November, Baird analyst Catherine Ramsey Schulte trimmed her price target on Illumina, Inc. (NASDAQ:ILMN) to $437 from $493 and maintained a “Neutral” rating on the shares. She is encouraged by the apparent strength of underlying demand, but she is apprehensive about intense competition in 2022.
Illumina, Inc. (NASDAQ:ILMN) has recently seen an increase in hedge fund sentiment. Illumina, Inc. (NASDAQ:ILMN) was in 55 hedge fund portfolios in the third quarter of 2021 compared to 51 in the previous quarter.
In its third-quarter 2021 investor letter, Polen Capital mentioned Illumina, Inc. (NASDAQ:ILMN). Here is what the fund said:
“Illumina shares underperformed on news that the company closed its acquisition of GRAIL despite regulatory reviews in the U.S. and EU that are still pending. We believe there is no precedent for applicable courts to use as a basis for validly concluding this acquisition violates antitrust law. Also, we think U.S. regulators were unnecessarily delaying their regulatory reviews in hopes of deterring Illumina and GRAIL from moving forward. Grail is still a
pre-revenue business, and we believe it will be highly dilutive to Illumina’s earnings in the short term. Still, we expect Illumina’s core business to strengthen as a result of this acquisition. We also expect earnings accretion from GRAIL in the intermediate-term as its liquid biopsy test appears to be effective for early cancer detection across 50 of the most lethal cancers (most of which there are no tests for today).”
6. Cerner Corporation (NASDAQ:CERN)
D E Shaw Stake Value: $184,101,000
Percentage of D E Shaw’s 13F Portfolio: 0.16%
Number of Hedge Fund Holders: 36
Cerner Corporation (NASDAQ:CERN) creates, promotes, installs, hosts, and maintains health-care information technology, devices, hardware, and content for health-care organizations and consumers. In November, Baird analyst Vikram Kesavabhotla initiated coverage of Cerner Corporation (NASDAQ:CERN), rating the stock as “Neutral” and gave a price target of $82.
D E Shaw increased its hold in Cerner Corporation (NASDAQ:CERN) by 51% in the third quarter, ending the period with 2.61 million shares of the company. Overall, 36 hedge funds in Insider Monkey’s database of 867 funds are bullish on Cerner Corporation (NASDAQ:CERN).
Along with Johnson & Johnson (NYSE:JNJ), Pfizer Inc. (NYSE:PFE), and Thermo Fisher Scientific Inc. (NYSE:TMO), Cerner Corporation (NASDAQ:CERN) is one of the healthcare stocks to buy according to billionaire D E Shaw.
In its first-quarter 2021 investor letter, Cooper Investors mentioned Cerner Corporation (NASDAQ:CERN). Here is what Cooper Investors has to say about Cerner Corporation in its letter:
“The investment in Cerner, made just over a year ago, was based on what we perceived to be a Low-Risk Turnaround opportunity as a refreshed management team sought to increase margins, reduce capex and utilise balance sheet latency with buybacks and acquisitions. Taking account of the tough 2020 for Cerner’s hospital client base the company did a reasonable job executing on these initiatives. However, moving into 2021 more recent observations around intentionality and focus led to a reassessment of the investment proposition, particularly relative to the portfolio’s other technology and software investments.”
5. Baxter International Inc. (NYSE:BAX)
D E Shaw Stake Value: $190,724,000
Percentage of D E Shaw’s 13F Portfolio: 0.17%
Number of Hedge Fund Holders: 42
Baxter International Inc. (NYSE:BAX), headquartered in Deerfield, Illinois, is an American international health care corporation. The company’s main emphasis is on kidney illness and other chronic and urgent medical diseases. D E Shaw started building its position in Baxter International Inc. (NYSE:BAX) in the fourth quarter of 2010 and currently holds over 2.37 million shares in the company, valued at $190.72 million. The company represents 0.17% of the hedge fund’s 13F portfolio.
In November, Baxter International Inc. (NYSE:BAX) declared a quarterly dividend of $0.28 per share, in line with the previous. In October, Piper Sandler analyst Matt O’Brien initiated coverage of Baxter International Inc. (NYSE:BAX), rating the stock as “Neutral,” and gave a price target of $82.
Baxter International Inc. (NYSE:BAX) was in 42 hedge fund portfolios in the third quarter of 2021.
In its third-quarter 2021 investor letter, Cooper Investors, an investment management firm, mentioned Baxter International Inc. (NYSE:BAX). Here is what the fund 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. …” (Click here to see the full text)
4. Merck & Co., Inc. (NYSE:MRK)
D E Shaw Stake Value: $266,419,000
Percentage of D E Shaw’s 13F Portfolio: 0.24%
Number of Hedge Fund Holders: 77
Merck & Co., Inc. (NYSE:MRK) is a multinational pharmaceutical corporation that develops, manufactures, and distributes medications for humans and animals.
In November, Morgan Stanley analyst Matthew Harrison cut his price target on Merck & Co., Inc. (NYSE:MRK) to $82 from $88 and maintained an “Equal Weight” rating on the stock, citing the new COVID variant Omicron as proof of the pandemic’s persistent variation risk. According to the analyst, mRNA vaccines, some antibody treatments, and Pfizer Inc.’s (NYSE:PFE) oral are the most likely to benefit.
Merck & Co., Inc. (NYSE:MRK) recently saw a decrease in hedge fund sentiment. The number of long hedge fund positions declined to 77 in the third quarter compared to 79 positions in the previous quarter.
In its first-quarter 2021 investor letter, Artisan Partners mentioned Merck & Co., Inc. (NYSE:MRK). Here is what the fund said:
“In Q1, we initiated a position in Merck, a provider of health care solutions including prescription medicines, vaccines, biologic therapies, animal health and consumer care products. We purchased Merck when the stock came under pressure in part on concerns that the newly minted Biden administration could implement regulatory changes and lower drug costs in the pharmaceutical industry. Recent, but anticipated changes to Merck’s management team have also weighed on shares, as have concerns over the company’s heavy reliance on immunotherapy treatment Keytruda. Notably, Merck is not getting much credit from investors for the 60+ programs it has in clinical development, despite having several solid and large new product opportunities. Additionally, the company’s strong balance sheet and robust free cash flow provide it multiple options for future partnerships and acquisitions. While Merck is undergoing a period of transition, we think the company’s fundamentals are strong and believe changes to management should be a catalyst for improvement.”
3. Amgen Inc. (NASDAQ:AMGN)
D E Shaw Stake Value: $267,103,000
Percentage of D E Shaw’s 13F Portfolio: 0.24%
Number of Hedge Fund Holders: 52
Amgen Inc. (NASDAQ:AMGN) is an American global biopharmaceutical corporation. Amgen Inc. (NASDAQ:AMGN) declared a quarterly dividend of $1.94 per share on December 3, up 10.2% from the previous payout of $1.76.
On December 6, Salveen Richter of Goldman Sachs initiated coverage of Amgen Inc. (NASDAQ:AMGN), rating the stock as “Buy” rating and gave a price target of $258.
As of the end of the third quarter of 2021, 52 hedge funds in Insider Monkey’s database held stakes in Amgen Inc. (NASDAQ:AMGN), compared to 53 funds in the earlier quarter.
Two Sigma Advisors, with 1.85 million shares, is the most significant stakeholder in Amgen Inc. (NASDAQ:AMGN).
In its third-quarter 2021 investor letter, Smead Capital Management mentioned Amgen Inc. (NASDAQ:AMGN). Here is what the fund said:
“Our poor performers for the quarter were quite eclectic. Amgen (AMGN) suffered a 12% decline from the Delta variant of COVID-19 retarding doctor visits and reducing new prescriptions.”
2. Moderna, Inc. (NASDAQ:MRNA)
D E Shaw Stake Value: $290,093,000
Percentage of D E Shaw’s 13F Portfolio: 0.26%
Number of Hedge Fund Holders: 49
Moderna, Inc. is a biotechnology business that develops messenger RNA-based medicines and vaccines for infectious illnesses, immuno-oncology, rare diseases, cardiovascular disorders, and auto-immune diseases. On December 6, Cowen analyst Tyler Van Buren initiated coverage of Moderna, Inc. (NASDAQ:MRNA), rating the stock as “Market Perform” and gave a price target of $250.
Out of the hedge funds being tracked by Insider Monkey, Coatue Management is a leading shareholder in Moderna, Inc. (NASDAQ:MRNA) with 6.05 million shares worth more than $2.33 billion. Even after selling 920,545 shares of Moderna, Inc. (NASDAQ:MRNA) in the third quarter, D E Shaw still holds 753,763 shares worth about $290.09 million.
Overall, hedge funds are loading up on Moderna, Inc. (NASDAQ:MRNA), as 49 out of the 867 funds tracked by Insider Monkey held stakes in the biotech company, compared to 37 funds a quarter earlier.
Carillon Tower Advisers, an investment management firm, in its third-quarter 2021 investor letter, mentioned Moderna, Inc. (NASDAQ:MRNA). Here is what the fund said:
“Moderna is a biotechnology company pioneering messenger RNA (mRNA) therapeutics and vaccines. The stock proved to be an impressive contributor once again in the quarter, as investors continue to evaluate the potential for future growth driven primarily by the firm’s revolutionary COVID-19 vaccine. Strong global demand for the vaccine may persist for the foreseeable future in order to maintain immunity as well as provide protection against any additional future variants. The potential for the firm’s mRNA technology to be used in a number of other use cases, specifically influenza, could also provide an additional tailwind for future growth.”
1. Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX)
D E Shaw Stake Value: $311,017,000
Percentage of D E Shaw’s 13F Portfolio: 0.28%
Number of Hedge Fund Holders: 55
Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) is a Boston, Massachusetts-based biopharmaceutical business. In December, RBC Capital analyst Brian Abrahams raised his price target on Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) to $265 from $250 and kept an “Outperform” rating on the shares.
The hedge fund chaired by D E Shaw holds close to 1.71 million shares in Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) worth over $311.02 million. D E Shaw’s stake in Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) shares increased by 121% in the third quarter of 2021.
With 1.89 million shares worth more than $343.10 million, New York-based investment company Renaissance Technologies is the largest stakeholder in Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) among the hedge funds tracked by Insider Monkey.
In its second-quarter 2021 investor letter, Artisan Partners mentioned Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX). Here is what the fund said:
“Turnover in the portfolio was low in Q2, but we did initiate a position in biotechnology firm Vertex Pharmaceuticals. Vertex dominates the market for treatment of cystic fibrosis with limited competition. Shares were under pressure at the time of purchase, driven by recent regulatory hurdles and Vertex’s decision not to pursue late-stage development of VX-864 after an unexpectedly unfavorable outcome. VX-864 is designed to treat alpha-1 antitrypsin deficiency (AATD), which is an inherited disorder with a strong correlation to pediatric liver disease. Irrespective of Vertex’s AATD pipeline, the company has nearly two decades of patent protection remaining for its cystic fibrosis franchise. Management maintains a healthy reserve of cash and is focusing on research and development. We believe near-term growth is likely to be driven by Vertex’s expanding geographic presence and expansion of medicines to lower age groups with longterm gains rising from the company’s diversifying pipeline.”
You can also take a peek at 10 Healthcare Stocks to Buy According to Mario Gabelli and 10 Best Healthcare Stocks to Buy According to Matthew Halbower’s Pentwater Capital Management
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Disclosure: None. 10 Healthcare Stocks to Buy According to Billionaire DE Shaw is originally published on Insider Monkey.
