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American International Group Inc (AIG): Multi-Billion Dollar Hedge Fund Bullish in All the Right Ways

Hedge funds and other notable investors have filed their 13Fs for the fourth quarter of 2012, disclosing many of their long equity positions as of the end of December. While the portfolios are from several weeks ago, there are still a few ways for investors to use this information. We have found, for example, that the most popular small cap stocks among hedge funds outperformed the market by 18 percentage points a year in our back tests (check out the details here). It can also be productive to treat individual 13Fs as “free” recommendations from fund managers. We have picked out the top five stock picks from Larry Robbins’s Glenview Capital, a mammoth fund that flies under the radar of the mainstream media.


Larry Robbins has operated Glenview since 2001. Before that, Robbins was a trader at Leon Cooperman’s Omega Advisors.  Despite a poor performance in 2008, Glenview Capital recovered in 2010 by returning 15.7%, performing better than average hedge funds and the S&P 500 index. Overall, Robbins returned 301% after fees and expenses between January 2001 and December 2010.  Robbins’s top holdings at the end of last year include health care companies, an insurance company and a multifaceted engineering firm.  (See our recap from the previous quarter.)

Robbins’s top pick is Life Technologies Corp. (NASDAQ:LIFE).  Life Technologies comprises 7.74% of Glenview Capital’s equity portfolio according to its most recent 13F filing with the SEC, and therefore represents a fairly concentrated position.  The company is a global science operator, with divisions in research sciences, applied sciences and medical sciences.  Life Technologies has a market cap of $10.52 billion, and a P/E ratio of 24.75.  Revenue for 2012 was $3.8 billion, up 2% from 2011.  The company’s share price is currently trading at $60.63, which is up over an impressive 25% year-to-date, but still off recent highs near $65 a pop. According to various rumors swirling their way around the blogosphere, Life appears to be acquisition target, which may be driving a majority of Mr. Market’s bullishness.

Robbins’s No. 2 stock pick is Tenet Healthcare Corp (NYSE:THC). Once again, Glenview Capital has a fairly large position in the company comprising 6.34% of its total equity portfolio—a total of nearly 14 million shares. Tenet Healthcare owns and operates acute care hospitals, ambulatory surgery centers, diagnostic imaging centers and related health care facilities.  The company has a market cap of $4.2 billion, and a four-quarter trailing EPS of $1.36. The company recently reported increased revenue of $336 million for Q4 of 2012, up 16.7% from the previous quarter one year earlier.

Increased admissions to its facilities were a major force behind this boost, and Tenet has stated that expected FY2013 revenue should be between $1.325 billion and $1.425 billion. Tenet’s share price has skyrocketed more than 80% over the last six months, is up over 20% year-to-date, and is trading near a multi-year high of $40.29. Clearly Robbins has picked a winner with Tenet, and the growth picture looks intact moving forward.

American International Group Inc (NYSE:AIG), meanwhile, comes in at No. 3 in the hedgie’s equity portfolio, although he reduced his position by 3% last quarter.

American International Group Inc (NYSE:AIG) has seen its share price pop nearly 30% over the past year, and it still trades at a bargain bin price-to-book multiple of 0.59. More interestingly, AIG displaced Apple last quarter as the hedge fund industry’s top stock pick, and the leaner, meaner post-bailout insurer is quite the “growth at a reasonable price” play at the moment.

Another pick in the healthcare sector space, sitting at No. 4 in the fund’s equity portfolio, is Health Management Associates Inc (NYSE:HMA). Compared to the other stocks in this “fab five,” so to speak, Health Management has a smaller market cap below $3 billion, though it has had a similarly impressive 2013, up more than 20% year-to-date. The company owns and operates general acute care hospitals and other health care facilities with a rural focus, and it recently reported that Q4 net revenue grew to $1.48 billion, an increase of over 6% from the same period one year earlier. Robbins owns over 35 million shares of the Health Management, and it appears that for the time being, he’s been right as rain about this investment as well.

Lastly, we have Flextronics International Ltd. (NASDAQ:FLEX), rounding out this top five. Probably unbeknownst to those who aren’t Flextronics investors, the company is a technology supply chain player providing design, logistics and manufacturing services to a variety of business segments including the industrial, aerospace and defense sectors. The company recently reported $103 million in restructuring charges for its latest fiscal Q3, and has shared that more charges are likely to come, at least on a quarterly basis. This, in layman’s terms, led to an EPS to slide of 67% year-over-year. Yes, shares of Flextronics are essentially flat over the past six months, but there’s obvious value here at a mere 0.18 times sales and a price-to-cash multiple below 3.0.

In short, it’s always important to follow the smart money, both from an individual and aggregate standpoint. With some of the picks that grace Robbins and Glenview Capital’s equity portfolio, it’s easy to see why retail investors should pay attention to this space.

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Insider Monkey’s small-cap strategy returned 29.2% between September 2012 and February 2013 versus 8.7% for the S&P 500 index. Try it now by clicking the link above.

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