In this article we look at why Billionaire Jeffrey Talpins Just Fled From These 10 Healthcare Stocks. Click to skip ahead and see why Billionaire Jeffrey Talpins Just Fled From These 5 Healthcare Stocks.
Moderna, Inc. (NASDAQ:MRNA), Thermo Fisher Scientific Inc. (NYSE:TMO), and Danaher Corporation (NYSE:DHR) are three of the healthcare stocks that billionaire money manager Jeffrey Talpins has been unloading in 2022.
Jeffrey Talpins’ Element Capital Management is a New York-based hedge fund that Talpins launched with $250 million in 2005. It has since grown to become a powerhouse in the industry, managing over $48 billion in assets as of March 2022 and making its founder and chief investment officer a billionaire in the process, with a fortune estimated at $2.2 billion by Forbes.
Talpins graduated from Yale where he studied economics and applied mathematics with a focus on finance, which would serve him well in his later roles as a trader at Goldman Sachs and Citigroup. He carried his experience from those roles over to Element Capital, where he employs a macro investing approach, investing across stocks, bonds, and currencies.
Element Capital has consistently ranked among the upper echelon of hedge funds, appearing in the Barron’s Top 100 Hedge Funds list eight times between 2008 and 2017. Through August 2018 the fund’s annualized returns stood at an exceptional 21%, obliterating the broader hedge fund industry during that period.
Element Capital did have a down year in 2021 however, losing 9% even as many other macro trading hedge funds were outperforming the market. Element Capital was also off to a shaky start in 2022, being down 2.7% in January.
Perhaps given the fund’s recent struggles, Talpins massively shook up its 13F portfolio in Q1, slashing its assets down to $200 million from $1.55 billion a quarter earlier and investing across a much wider range of equities. Talpins axed 36 of his fund’s former holdings during Q1, and massively reduced his position in all but one of his other positions, while adding 125 new holdings to Element’s portfolio.
Talpins also drastically shook up his sector allocation during the quarter, greatly cutting his exposure to healthcare, consumer staples, and consumer discretionary stocks, while building up stakes in tech, industrial, and transportation stocks in their place.
In this article we’ll look at ten healthcare stocks that Talpins was cutting loose from Element Capital’s portfolio during Q1 as he turned his eyes towards other investment opportunities.
The following data is gathered from Element Capital Management‘s latest 13F filing with the SEC. We follow hedge funds like Element Capital Management because Insider Monkey’s research has uncovered that their consensus stock picks can deliver outstanding returns.
All hedge fund data is based on the exclusive group of 900+ funds tracked by Insider Monkey that filed 13Fs for the Q1 2022 reporting period.
Billionaire Jeffrey Talpins Just Fled From These 10 Healthcare Stocks
10. Convey Health Solutions Holdings Inc (NYSE:CNVY)
Former Value of Element Capital Management‘s 13F Position: $1.31 million
Number of Hedge Fund Shareholders: 16
Convey Health Solutions Holdings Inc (NYSE:CNVY) joined Moderna, Inc. (NASDAQ:MRNA), Thermo Fisher Scientific Inc. (NYSE:TMO), and Danaher Corporation (NYSE:DHR) as some of the healthcare stocks that Jeffrey Talpins was fleeing from in Q1. Several hedge funds have fallen off the Convey Health Solutions Holdings Inc (NYSE:CNVY) bandwagon since the company’s IPO in the second quarter of 2021.
27 of the select group of hedge funds that are tracked by Insider Monkey’s database were long CNVY at the end of its first quarter on the market, a figure that had fallen to just 16 by the end of March 2022. After selling off 39% of its Convoy Health position in Q4, Element Capital unloaded another 77% of its remaining position during Q1.
As it turned out, Talpins and other money managers missed out on Convey Health Solutions Holdings Inc (NYSE:CNVY) shares skyrocketing by over 135% after it was announced that the company would be taken private by TPG Capital at $10.50 per share, about a 143% premium to what CNVY shares were trading at before the merger was announced. Convey’s board has approved the deal, which is expected to close in the second half of this year.
9. Pfizer Inc. (NYSE:PFE)
Former Value of Element Capital Management‘s 13F Position: $148 million
Number of Hedge Fund Shareholders: 80
Next up is Pfizer Inc. (NYSE:PFE), which Jeffrey Talpins’ hedge fund unloaded a significant position in during Q1. The fund sold off 98% of its former stake in the pharmaceutical giant, which ranked as its top stock pick at the end of 2021. It was also a newly added position during that quarter, as Talpins invested in and then quickly divested himself of Pfizer and several other healthcare stocks between October 1 and March 31.
Pfizer Inc. (NYSE:PFE) has become embroiled in a lawsuit with Enanta Pharmaceuticals Inc (NASDAQ:ENTA), which was just recently granted a patent for its protease inhibitor COVID drug that the firm now accuses Pfizer of having violated in the creation of its antiviral pill Paxlovid. Enanta is seeking a jury trial in the case, with the aim of securing royalties on Pfizer’s sales of the drug, which totaled $1.5 billion in the first quarter.
Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY) has also accused Pfizer Inc. (NYSE:PFE) of patent infringement when it comes to the delivery technology used by Pfizer’s blockbuster vaccine, sales of which are expected to top $30 billion this year. Pfizer has refuted those allegations, claiming the tech was irrelevant to the vaccine’s success.
8. Johnson & Johnson (NYSE:JNJ)
Former Value of Element Capital Management‘s 13F Position: $109 million
Number of Hedge Fund Shareholders: 84
Johnson & Johnson (NYSE:JNJ) ranked as Element Capital’s 4th-largest 13F position heading into 2022 after the fund bought 635,767 JNJ shares during Q4. A quarter later and the fund appears to be headed for the exits, as it sold off 98% of those shares during Q1. Hedge fund ownership of pharmaceutical products manufacturer and drug developer has stayed remarkably steady over the past several years, as many hedge funds appear content to take the long view with JNJ shares.
Johnson & Johnson (NYSE:JNJ) shares have gained 4% this year as the company is likely viewed as a good safe haven investment to hold during the current and future economic turbulence. Johnson & Johnson, which pulled in $93 billion in revenue last year, has a diverse lineup of products that are likely to be fairly recession proof, including Tylenol, Johnson’s Baby, and Listerine.
The 2008 financial crisis provides a possible glimpse into how Johnson & Johnson (NYSE:JNJ) is likely to fare in the coming years, and the company not only survived but thrived during the crisis, growing its net income every year throughout the 2007-2013 period. JNJ’s sales grew by 5% year-over-year in the first quarter, hitting $23.43 billion, while its gross profit grew by 3.7% to $15.83 billion.
7. Eli Lilly and Company (NYSE:LLY)
Former Value of Element Capital Management‘s 13F Position: $86.8 million
Number of Hedge Fund Shareholders: 53
Element Capital also took a large position in Eli Lilly and Company (NYSE:LLY) during the fourth quarter before promptly unloading 99% of that holding during the first three months of 2022. Hedge fund ownership of LLY has dipped by 20% since peaking in the middle of 2021.
Eli Lilly and Company (NYSE:LLY) shares have also been strong in 2022, gaining over 20%. The company’s intriguing pipeline of treatments that target diabetes and obesity, two of the greatest epidemics in the U.S today, have the potential to be blockbusters. Eli Lilly’s glycemic control treatment Mounjaro has been pegged by research firm Evaluate Pharma as having a net present value of $22.1 billion. The research firm also thinks highly of Eli Lilly’s Alzheimer’s treatment donanemab, which it pegs at $12.4 billion in NPV.
The Baron Health Care Fund is also bullish on Eli Lilly and Company (NYSE:LLY)’s potential blockbuster Alzheimer’s treatment, as well as the company’s future growth outlook, sharing this in its Q1 2022 investor letter:
“Eli Lilly and Company (NYSE:LLY) is a global pharmaceutical company with a diverse offering primarily focused on therapeutics. Performance was strong mostly due to consistent financial growth powered by its core diabetes (and future obesity) franchise, as well as the constant drumbeat surrounding the Alzheimer’s therapeutic market, of which Eli Lilly has one of the three potential winning blockbuster candidates in Donanemab. We retain conviction in Eli Lilly given the company’s strong long-term growth outlook.”
6. Quest Diagnostics Incorporated (NYSE:DGX)
Former Value of Element Capital Management‘s 13F Position: $11.46 million
Number of Hedge Fund Shareholders: 38
Closing out the first half of the list is Quest Diagnostics Incorporated (NYSE:DGX), the clinical laboratory company that Element Capital unloaded from its 13F portfolio in Q1, a quarter after building a new stake in the company. DGX shares went on a torrid run coming out of their pandemic floor, gaining 136% through the end of 2021, but have lost 23% of their value this year.
With Covid testing on the decline, Quest Diagnostics Incorporated (NYSE:DGX)’s revenue is likewise falling, dipping by 4% year-over-year in Q1 to $2.61 billion, with testing slowing further as the quarter went on. Despite those headwinds, the company raised its full-year top and bottom-line guidance, thanks in part to Covid emergency measures being extended into July. The company is also confident that its direct-to-consumer business can pick up the Covid testing slack. That business doubled its sales during the first quarter.
The Davis Opportunity Fund is bullish on the healthcare space given the aging demographics of the United States. It cited Quest Diagnostics Incorporated (NYSE:DGX) as one of its holdings primed to take advantage of that trend 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.”
In the second half of this article we’ll look at five other healthcare stocks that Jeffrey Talpins was fleeing from in Q1, including Moderna, Inc. (NASDAQ:MRNA), Danaher Corporation (NYSE:DHR), and Thermo Fisher Scientific Inc. (NYSE:TMO).
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Disclosure: None. Billionaire Jeffrey Talpins Just Fled From These 10 Healthcare Stocks is originally published at Insider Monkey.