In this article, we will discuss the 10 healthcare stocks to buy now according to billionaire Larry Robbins.
Larry Robbins is an American investor and philanthropist, born in 1969. He is the CEO and portfolio manager of Glenview Capital. According to Forbes, Larry Robbins has a current net worth of about $2 billion.
Larry Robbins’ Investment Philosophy
Unlike most investors, Larry Robbins believes in holding stocks for long periods without employing stop losses. Robbins said in an interview with Barrons that he believes stop losses might prevent a few losses, but it costs more in gains to shareholders. One of his key investment strategies is growth at a reasonable price. He prefers companies with steady revenues, which are firmly established in the market. Robbins considers himself to be a “suggestivist” investor instead of an activist investor.
Larry Robbins was one of the first investors that went big on the Affordable Care Act and started investing in the U.S healthcare sector in 2012. At the end of the same year, the Glenview Opportunity fund returned 54% to investors.
Glenview Capital
Glenview Capital was founded by Larry Robbins in 2000. It has holdings in several sectors including healthcare, industrials, consumer services, and information technology. However, the largest concentration of the fund is in the healthcare sector. In 2019, when the world was going through a recession, Glenview Capital recorded phenomenal returns of 29.91%, while an average hedge fund returned around 8%. The Glenview flagship fund had leapt by 33%, while its opportunity fund surged by 50%.
As of March 31, Glenview Capital had $4.9 billion in managed 13F securities, up from $4.69 billion in the previous quarter. In Q1 2022, Glenview Capital made 9 new purchases and exited 6 stocks. Moreover, the firm increased its holdings in 26 stocks while reducing stakes in 20 names. The top 3 stocks of Glenview Capital represented 26% of its 13F securities.
Tenet Healthcare Corporation (NYSE:THC), Cigna Corporation (NYSE:CI), and Global Payments Inc. (NYSE:GPN) are some of the most notable names in Glenview Capital’s portfolio.
Larry Robbins of Glenview Capital
Our Methodology
The stocks mentioned in the article are part of the healthcare sector and were taken from Glenview Capital’s 13F filings as of the first quarter of 2022. The companies are listed according to their concentration in Glenview Capital’s portfolio. The stocks that were being dumped significantly by Glenview Capital have not been added to the list. For further understanding of the readers, the analyst estimates, financial reports, and dividend history of these stocks have also been mentioned.
The hedge fund sentiment around each stock has been taken from Insider Monkey’s Q1 2022 database of 912 elite hedge funds.
Health Stocks to Buy Now According to Billionaire Larry Robbins
10. Boston Scientific Corporation (NYSE:BSX)
Glenview Capital’s Stake Value: $61.3 million
Percentage of Glenview Capital’s13F Portfolio: 1.24%
Number of Hedge Fund Holders: 55
Boston Scientific Corporation (NYSE:BSX) is a US-based multinational biomedical company, specializing in medical devices for interventional medical specialities. According to the Insider Monkey database, the company was part of 55 hedge fund portfolios in Q1 2022, with combined stakes valued at $4.67 billion. Among these investment portfolios, Glenview Capital owned 1.38 million shares of Boston Scientific Corporation (NYSE:BSX) worth $61.3 million, with a 1.24% concentration in the firm’s total holdings.
Truist analyst Richard Newitter lowered his price target on Boston Scientific Corporation (NYSE:BSX) to $45 from $51 and maintained a Buy rating on its shares. The analyst expects “in-linish” organic revenue growth from the whole MedTech group, while the slanting forex-related and inflationary pressures could sway the EPS estimates for FY 2022 and 2023. However, the analyst believes a miss to be “highly-unlikely” in the upcoming period due to its wider than normal organic revenue growth guide for Q2.
In the trailing twelve months as of June 30, Boston Scientific Corporation (NYSE:BSX) recorded total revenues of $12.16 billion, compared to $11.88 billion in the same period last year. However, the net income was $230 million less than the 2021 levels. During the same period, the company reduced its net debt from $7.397 billion to $7.131 billion. Furthermore, the TTM FCF was recorded at $928 million.
Tenet Healthcare Corporation (NYSE:THC), Cigna Corporation (NYSE:CI), and Global Payments Inc. (NYSE:GPN) are some of the notable stocks in Glenview Capital’s portfolio, along with Boston Scientific Corporation (NYSE:BSX).
9. HCA Healthcare, Inc. (NYSE:HCA)
Glenview Capital’s Stake Value: $79.4 million
Percentage of Glenview Capital’s13F Portfolio: 1.6%
Number of Hedge Fund Holders: 62
HCA Healthcare, Inc. (NYSE:HCA) is a US-based healthcare facilities operator. The company operates close to 190 hospitals and 2,000 care sites across the United States and the United Kingdom. At the end of the first quarter of 2022, Glenview Capital owned $79.4 million worth of company shares.
HCA Healthcare, Inc. (NYSE:HCA) outperformed its EPS estimates in the second quarter of 2022 by 13.33% after recording an EPS of $4.21. The revenue exceeded the consensus of $14.73 billion by $93.54 million. Furthermore, the company’s cash flow from operations was around $1.64 billion in Q2.
HCA Healthcare, Inc. (NYSE:HCA) has a dividend yield of around 1.25% with an annual dividend payout of $2.24. The most recent quarterly dividend of $0.56 was declared on April 22, and paid out on June 30.
Here is what First Eagle Investment Management had to say about HCA Healthcare, Inc. (NYSE:HCA) in its Q3 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.”
8. Universal Health Services, Inc. (NYSE:UHS)
Glenview Capital’s Stake Value: $89.7 million
Percentage of Glenview Capital’s 13F Portfolio: 1.81%
Number of Hedge Fund Holders: 40
Universal Health Services, Inc. (NYSE:UHS) is an American healthcare facilities company. As of the first quarter of 2022, 40 hedge funds were bullish on the company, compared to 35 in the previous quarter. First Eagle Investment Management was the most significant stakeholder of the company in Q1 2022, with total shares valued at $602.3 million.
On July 20, Universal Health Services, Inc. (NYSE:UHS) announced a quarterly cash dividend of $0.20 to be paid out on September 15, to shareholders of record as of September 1, 2022.
On July 6, Universal Health Services, Inc. (NYSE:UHS) was downgraded from Market Perform to Underperform by BMO analyst Matt Borsch. The analyst also lowered his price target on the firm from $133 to $60, owing to the warnings of a weak Q2.
At the end of Q1 2022, Glenview Capital owned 618,871 shares of Universal Health Services, Inc. (NYSE:UHS) worth $89.7 million, representing 1.81% of the fund’s portfolio.
7. Encompass Health Corporation (NYSE:EHC)
Glenview Capital’s Stake Value: $91.4 million
Percentage of Glenview Capital’s 13F Portfolio: 1.85%
Number of Hedge Fund Holders: 48
Encompass Health Corporation (NYSE:EHC) is an American home and facility-based post-acute health care services company. The company’s operations revolve around three divisions – inpatient rehabilitation, home health, and hospice. Glenview Capital increased its holdings in the company by 73% in Q1 2022. By the end of the quarter, Encompass Health Corporation (NYSE:EHC) represented 1.85% of Glenview Capital’s portfolio with 1.285 million shares valued at $91.4 million.
On July 20, Encompass Health Corporation (NYSE:EHC) announced a joint venture with BJC HealthCare for a 40-bed inpatient rehabilitation hospital in West County. The total cost of construction is expected to be around $30 million and the land was bought for $3.5 million in December 2021. The facility is expected to start accepting patients in 2024. Moreover, according to the company, it will employ 80 to 110 people.
On June 21, Truist analyst David MacDonald lowered Encompass Health Corporation (NYSE:EHC)’s health price target from $85 to $75, keeping the recent market multiples in mind. However, the analyst maintained a Buy rating on the company shares.
Encompass Health Corporation (NYSE:EHC) is a significant stock in Glenview Capital’s portfolio along with Tenet Healthcare Corporation (NYSE:THC), Cigna Corporation (NYSE:CI), and Global Payments Inc. (NYSE:GPN).
Heartland Advisors mentioned Encompass Health Corporation (NYSE:EHC) in its Q4 2021 investor letter. Here is what it said:
“COVID complications. Shares of many Health Care companies lagged as the continuing threat of COVID-19 dampened demand for elective medical procedures and healthcare 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.”
6. Centene Corporation (NYSE:CNC)
Glenview Capital’s Stake Value: $92.055 million
Percentage of Glenview Capital’s 13F Portfolio: 1.86%
Number of Hedge Fund Holders: 60
Centene Corporation (NYSE:CNC) is a managed-care company headquartered in St. Louis, Missouri. In May, the company announced its exit from the pharmacy benefit management business after divesting Magellan Rx and PANTHERx Rare for $2.8 billion. Centene Corporation (NYSE:CNC) updated its EPS guidance after its Q1 2022 results from $5.3-$5.5 to $5.40-$5.55.
On June 14, Jefferies analyst David Windley upgraded Centene Corporation (NYSE:CNC)’s from Hold to Buy. According to Windley, “high-teens EPS growth through a recession is stout and likely compares favorably to peers”. In addition, the analyst raised his price target of the company to $115 from $82.
As of the first quarter of 2022, Glenview Capital had a stake worth $92.055 million in Centene Corporation (NYSE:CNC) with 1.09 million shares, making up 1.86% of the portfolio. The most prominent stake was held by Viking Global with 7.8 million shares, valued at $657.19 million.
5. AmerisourceBergen Corporation (NYSE:ABC)
Glenview Capital’s Stake Value: $116.4 million
Percentage of Glenview Capital’s 13F Portfolio: 2.35%
Number of Hedge Fund Holders: 37
AmerisourceBergen Corporation (NYSE:ABC) is a US-based pharmaceutical company that provides drug distribution and consulting services to medical businesses. On July 20, Argus analyst David Toung set the firm’s price target to $170, up from $160 and maintained a Buy rating on its shares. The analyst believes that the company posted strong Q2 results and its recent acquisition of Alliance Healthcare is a significant growth prospect. He also upgraded his EPS consensus for the company from $10.85 to $10.95 for FY 2022.
AmerisourceBergen Corporation (NYSE:ABC) as of July 25 delivers a dividend yield of 1.28% with an annual dividend payout of $1.84. Moreover, the company has paid out dividends of $3 billion and repurchased $10 billion worth of stock in the last decade. The net cash flow generated in the same period summed up to $17.8 billion. In addition, the company announced another $1 billion repurchase program on June 1.
AmerisourceBergen Corporation (NYSE:ABC) posted solid FQ2 results in May with an EPS of $3.22, exceeding the analyst estimates of $2.92. The revenue of $57.72 billion also outperformed the forecasts by 0.81%. AmerisourceBergen Corporation (NYSE:ABC) covered 2.35% of Glenview Capital’s portfolio at the end of Q1 2022. The fund owned company shares worth $116.4 million.
Here is what Heartland Advisors had to say about AmerisourceBergen (NYSE:ABC) Corporation in its Q3 2021 investor letter:
“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.”
4. Baxter International Inc. (NYSE:BAX)
Glenview Capital’s Stake Value: $171.44 million
Percentage of Glenview Capital’s 13F Portfolio: 3.47%
Number of Hedge Fund Holders: 45
Founded as a manufacturer of intravenous therapy, Baxter International Inc. (NYSE:BAX) is a medical equipment company that focuses on therapy and products for acute and chronic medical conditions, including kidney diseases. As of Q1 2022, Baxter International Inc. (NYSE:BAX) was a part of 45 hedge funds’ portfolios. Generation Investment Management was the biggest shareholder of the company with 16.4 million shares worth $1.27 billion.
Stifel analyst Rick Wise maintained a Buy rating on Baxter International Inc. (NYSE:BAX)’s shares, with a price target of $75, down from $85. The analyst added that the price target revisions “do not represent any fundamental shift in our positive long-term thinking for the MedTech industry or the potential for broad-based growth reacceleration”.
According to the firm’s Q1 2022 13F filings, Glenview Capital owned 2.21 million shares of Baxter International Inc. (NYSE:BAX) worth $171.44 million, representing 3.47% of the fund’s portfolio.
Here is what Cooper Investors had to say about Baxter International Inc. (NYSE:BAX) in its Q3 2021 investor letter:
“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.”
3. Bausch Health Companies (NYSE:BHC)
Glenview Capital’s Stake Value: $211.5 million
Percentage of Glenview Capital’s 13F Portfolio: 4.28%
Number of Hedge Fund Holders: 48
Bausch Health Companies (NYSE:BHC) is a Canadian pharmaceutical company, primarily focusing on skin diseases, gastrointestinal disorders, eye health, and neurology. The company has close to 20,000 employees.
Bausch Health Companies (NYSE:BHC) was a part of 48 hedge fund portfolios in the first quarter of 2022 with a combined stake value of $3.17 billion, compared to 53 portfolios with stakes worth $3.865 billion in the previous quarter. Bausch Health Companies (NYSE:BHC) covered 4.28% of Glenview Capital’s portfolio with 9.256 million shares worth $211.5 million.
On June 13, JPMorgan analyst Chris Schott initiated Bausch Health Companies (NYSE:BHC)’s coverage with an Overweight rating and a $12 price target. The analyst noted that the Xifaxan patent litigation and Bausch & Lomb separation pathway significantly affects the stock’s valuation.
2. Cigna Corporation (NYSE:CI)
Glenview Capital’s Stake Value: $382.417 million
Percentage of Glenview Capital’s 13F Portfolio: 7.74%
Number of Hedge Fund Holders: 63
Cigna Corporation (NYSE:CI) is a multinational company, primarily focusing on managed health care and insurance. As of Q1 2022, Glenview Capital had approximately 1.6 million shares of the company valued at $382.317 million, representing 7.74% of the firm’s portfolio. The fund had also increased its holding in the company by 44% compared to Q4 2021.
In its most recent guidance for FY 2022, Cigna Corporation (NYSE:CI) is expected to post an EPS of $22.6 with a total growth of at least 725,000 medical customers. Furthermore, from its Evernorth segment, the company is expecting income from operations of around $6.1 billion, and $3.95 billion from Cigna Healthcare.
On July 14, Truist analyst David MacDonald maintained a Buy rating on Cigna Corporation (NYSE:CI)’s shares and raised the price target from $310 to $330. On the same day, Jefferies analyst David Windley downgraded the company shares to Hold from Buy, calling it the most vulnerable MCO to an economic downturn. Windley also reduced his price target to $271 from $330.
Here is what Davis Opportunity Fund had to say about Cigna Corporation (NYSE:CI) in its Q4 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: $548.51 million
Percentage of Glenview Capital’s 13F Portfolio: 11.1%
Number of Hedge Fund Holders: 55
Tenet Healthcare Corporation (NYSE:THC) is a Texas-based health care services company and the top healthcare stock pick of Glenview Capital, covering 11.1% of its portfolio, with shares worth $548.51 million as of Q1 2022. As of the first quarter of 2022, 55 hedge funds were bullish on Tenet Healthcare Corporation (NYSE:THC), compared to 49 hedge funds in Q4 2021.
Tenet Healthcare Corporation (NYSE:THC) exceeded its Q2 earnings estimates by a staggering 88.67%. The company posted an EPS of $1.50 compared to the $0.80 consensus. The company lagged in revenue estimates after generating $4.64 billion, compared to the estimates of $4.78 billion. In addition, the company reported cash and cash equivalents of $1.4 billion, which were 42.9% below the previous year.
On July 7, Deutsche Bank analyst Pito Chickering maintained a Buy rating on Tenet Healthcare Corporation (NYSE:THC)’s shares and lowered the price target to $90 from $110.
Here is what Oakmark Funds had to say about Tenet Healthcare Corporation in its Q3 2021 investor letter:
“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 healthcare 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.”
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Disclosure: None. 10 Healthcare Stocks to Buy Now According to Billionaire Larry Robbins is originally published on Insider Monkey.
