Billionaire Larry Robbins’ Big Q4 Moves in Humana Inc. (HUM), CIGNA Corporation (CI) and Others

Billionaire Larry Robbins, the founder of Glenview Capital Management, has been among the most scrutinized and closely-watched hedge fund managers in recent years due to his bullish bets on Obamacare. The New York-based hedge fund, founded in September 2000, had a terrible 2015 in terms of performance, as it recorded a loss of 17% last year. In fact, Glenview was among the worst performing hedge funds last year, and this year has yet to produce a turnaround for the struggling investment vehicle. The billionaire investor apologized for the terrible performance in a letter to investors for the third quarter, saying “I’ve failed to protect your capital, and mine, from a significant drawdown, despite a flat market”. According to out calculations, Glenview Capital’s long positions in public companies with a market capitalization above the $1 billion level posted a negative weighted average return of 7.5% in 2015, based on each position’s size at the beginning of each quarter. While our figures can differ from the actual returns of those long positions, as we can’t account for when in each quarter changes might have been made to them, it suggests that more than half of Glenview’s losses in 2015 were not due to long stock picking. As Larry Robbins is widely-known for his successful bets in the healthcare sector, it’s worth seeing what stocks the investor is betting on for 2016, so this article will discuss the investor’s most prominent moves carried out during the final quarter of 2015.

Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).

Let’s begin our discussion with Larry Robbins’ largest equity position as of the end of the fourth quarter. The billionaire investor lifted his stake in Humana Inc. (NYSE:HUM) by 1.62 million shares during the fourth quarter, to 8.25 million shares, which were valued at $1.47 billion on December 31. In July 2015, Aetna Inc. (NYSE:AET) and Humana inked a merger agreement that could create one of the largest health insurance companies in the United States. Under the terms of the deal, Humana shareholders are set to receive 0.8375 shares of Aetna and $125 in cash for each Humana share. The $37 billion acquisition still needs the approval of federal regulators, which is why the shares of Humana Inc. (NYSE:HUM) are currently trading at a huge discount to the value of the proposed deal and are down by 3% year-to-date. Last Monday, Florida became the tenth state to approve the multi-billion-dollar merger. Andreas Halvorsen’s Viking Global reported owning 4.33 million shares of Humana Inc. (NYSE:HUM) through the latest round of 13F filings.

In the fourth quarter of 2015, Glenview Capital upped its position in CIGNA Corporation (NYSE:CI) by 2.40 million shares to nearly 7.00 million shares. The fund’s position in CIGNA was valued at $1.02 billion on December 31 and comprised 5.76% of its equity portfolio. In the summer of 2015, Anthem Inc. (NYSE:ANTM) agreed to buy CIGNA amid consolidation in the health insurance industry. The deal is set to create the nation’s largest health insurance company should regulators approve it. The $54 billion deal has been approved by four states thus far, while the other 22 states are in the process of reviewing it. The terms of the deal say that CIGNA Corporation (NYSE:CI) shareholders will receive $103.40 in cash and 0.5152 shares of Anthem per CIGNA share. In the meantime, the shares of CIGNA are trading at a 20% discount to the deal price, with investors being concerned that the merger could be blocked. Thomas Steyer’s Farallon Capital owns 2.21 million shares of CIGNA Corporation (NYSE:CI) as of December 31.