Billionaire Larry Robbins’ Top Healthcare Picks for Q2

Larry Robbins‘ Glenview Capital has been underperforming the broader market and the overall hedge fund industry for over a year now. However, this underperformance hasn’t reduced the fund’s conviction in its healthcare picks or the healthcare sector in general. If anything, the fund has started relying even more on the sector to help it rebound from its downturn. This interesting detail was uncovered in the fund’s latest 13F filing with the Securities and Exchange Commission. According to the filing, Glenview Capital’s U.S equity portfolio was worth $13.68 billion at the end of March, down by 23% quarter-over-quarter. However, healthcare stocks increased to a 58% stake of the portfolio from 55% at the end of 2015. Nor is this a new phenomenon; healthcare stocks have consistently accounted for bigger chunks of the fund’s portfolio since the end of the first quarter of 2015, when they accounted for just 36% of the value of the fund’s equity portfolio. Since the fund is betting big on healthcare stocks to improve its performance going forward, in this article we will take a look at the fund’s top five healthcare picks at the end of first quarter and discuss how they have performed so far in 2016.

We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).

#5 Laboratory Corp. of America Holdings (NYSE:LH)

– Shares Owned by Glenview Capital (as of March 31): 5.45 million

– Value of Holding (as of March 31): $640 million

Let’s start with Laboratory Corp. of America Holdings (NYSE:LH), which has been a part of Glenview Capital’s equity portfolio since the second quarter of 2015. During the first quarter, the fund lowered its holding in the medical diagnostics company by 4%. Laboratory Corp. of America Holdings (NYSE:LH)’s stock has seen a consistent uptrend for the past several years, appreciating by over 2,500% since January 1999. Though at the beginning of 2016 it seemed like the stock had ended its multi-year bull run, the rally it has seen since mid-February seems to suggest that wasn’t the case. For its first quarter, the company reported EPS of $2.02 on revenue of $2.30 billion, topping analysts’ estimates of EPS of $1.96 on revenue of $2.19 billion. Laboratory Corp. of America Holdings launched Epi proColonon May 9, which is the first FDA-approved DNA-based blood test for colorectal cancer (CRC) screening. With ownership of 2.4 million shares of the company, Jacob Gottlieb‘s Visium Asset Management trailed Glenview Capital as the largest shareholder of the company among funds tracked by us at the end of March.

#4 AbbVie Inc (NYSE:ABBV)

– Shares Owned by Glenview Capital (as of March 31): 13.69 million

– Value of Holding (as of March 31): $781.78 million

Amid a 2.5% drop in AbbVie Inc (NYSE:ABBV)’s stock during the first quarter, Glenview Capital inched up its holding in the company by 2%. Up until last week, AbbVie Inc (NYSE:ABBV) was one of the few large biopharmaceutical companies whose stock was trading in the green for the year. However, shares of the company are currently trading down marginally for the year, owing to a recent decline after The U.S. Patent and Trademark Office’s Patent Trial and Appeal Board granted Coherus Biosciences Inc (NASDAQ:CHRS)’s request for an inter partes review of five patents which protect Abbvie’s best-selling drug Humira. Despite this patent ruling, most analysts continue to remain bullish on AbbVie due to the company’s strong drug pipeline and the almost 4% annual dividend yield that it currently sports, which they believe limits the downside of the stock. Neil Woodford‘s Woodford Investment Management boosted its stake in AbbVie by 26% to 11.06 million shares during the first quarter.

Billionaire Larry Robbins three favorite healthcare stocks are discussed on the next page.