HealthInvest Partners is a Stockholm-based fund management company founded by Carl Bennet and Anders Hallberg in 2006. The investment approach employed by the Swedish investment firm seeks to find companies with low valuations and possible catalysts to drive shareholder value. While only a few stock market participants know about this investment firm, HealthInvest Partners has performed incredibly well since inception. The firm’s HealthInvest Value Fund generated a net-of-fees return of 7% in 2015, after gaining 33% in 2014 and 35% in 2013. In fact, HealthInvest Value Fund has not suffered a down year in the past seven years or so, with its return reaching 22% per annum. Considering the exceptional performance of the Stockholm-based investment firm relative to the overall hedge fund industry in recent years, it seems like a great idea to have a look at the fund’s equity portfolio. HealthInvest Partners recently submitted the 13F filing for the first quarter of this year, so this article will discuss five new additions to the fund’s portfolio during the quarter.
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OraSure Technologies Inc. (NASDAQ:OSUR)
– Number of shares held by HealthInvest Partners as of March 31: 405,771
– Value of HealthInvest’s holding as of March 31: $2.93 Million
HealthInvest Partners acquired a new stake of 405,771 shares in OraSure Technologies Inc. (NASDAQ:OSUR) during the March quarter, which was valued at $2.93 million at quarter-end. The company develops and markets products and specimen collection devices using proprietary technologies. OraSure Technologies completed the design of a rapid Ebola antigen test using its OraQuick platform in early 2015. The test has already received an Emergence Use Authorization (EUA) from the FDA for use by laboratories and facilities that are adequately equipped and trained to test Ebola infection. The company recognized $2.3 million in revenues last year from the sale of this product to the Centers for Disease Control and Prevention (CDC) for investigational use and field testing in Africa. OraSure Technologies reported consolidated net revenues of $119.7 million for 2015, which increased from $106.5 million in 2014. The company’s management anticipates consolidated net revenues in the range of $28.5 million-to-$29.0 million for the first quarter of the current year. Shares of OraSure have gained 14% since the beginning of 2016 and are up 8% in the past 12 months. Ken Fisher’s Fisher Asset Management reported owning 824,592 shares of OraSure Technologies Inc. (NASDAQ:OSUR) through the latest round of 13Fs.
Valeant Pharmaceuticals Intl Inc. (NYSE:VRX)
– Number of shares held by HealthInvest Partners as of March 31: 370,000
– Value of HealthInvest’s holding as of March 31: $9.73 Million
The Stockholm-based investment firm also purchased a 370,000-share position in embattled Valeant Pharmaceuticals Intl Inc. (NYSE:VRX), which was worth $9.73 million on March 31. The shares of the Canadian-based pharmaceutical company have declined by 83% in the past 52 weeks due to strong criticism over exploitative price gouging and questions about the company’s accounting principles. Valeant Pharmaceutical recently completed the internal review of various Philidor and other related accounting matters, but its shares continue to trade at seemingly low levels due to ongoing worries surrounding the company’s business model. Valeant had been growing at a high pace in recent years by acquiring pharmaceutical companies with existing products, after which the company cut expenses through layoffs and downsizing and then raised the prices of acquired drugs. In a fresh letter to investors, HealthInvest Partners said that “Although the criticism of the business model has some merit, we believe the shares may offer substantial upside as Valeant’s market cap now hovers around 3x free cash flow.” Ray Carroll’s Breton Hill Capital reported owning 16,752 shares of Valeant Pharmaceuticals Intl Inc. (NYSE:VRX) through its 13F filing for the March quarter.
Merck & Co. Inc. (NYSE:MRK)
– Number of shares held by HealthInvest Partners as of March 31: 251,400
– Value of HealthInvest’s holding as of March 31: $13.30 Million
The fund’s 13F filing also revealed that HealthInvest initiated a new stake of 251,400 shares in Merck & Co. Inc. (NYSE:MRK) during the first three months of 2016, which was valued at $13.30 million on March 31. The Swedish investment firm discussed their investment in global health care company Merck & Co. in the investor letter mentioned above, saying that “Merck has experienced three difficult years characterized by declining sales and profits, but this negative development has now come to a halt”. Moreover, the letter said that Merck’s recent lunch of Keytruda, designed and approved for the treatment of advanced melanoma and metastatic non-small-cell lung cancer, as well as the launch of Zepatier, designed for the treatment of adult patients with chronic hepatitis C virus (HCV), “hold a lot of promise”. Shares of Merck are 7% in the green year-to-date and currently change hands at around 15.0-times expected earnings, below the forward P/E multiple of 15.3 for the health care sector and the ratio of 18.5 for the S&P 500 Index. Merck & Co. also pays out a quarterly dividend of $0.46 per share, which equates to a dividend yield of 3.25%. Ken Fisher’s Fisher Asset Management owns 6.70 million shares of Merck & Co. Inc. (NYSE:MRK) as of March 31.
INC Research Holdings Inc. (NASDAQ:INCR)
– Number of shares held by HealthInvest Partners as of March 31: 324,270
– Value of HealthInvest’s holding as of March 31: $13.36 Million
INC Research Holdings Inc. (NASDAQ:INCR) was another addition to HealthInvest’s equity portfolio during the first quarter of 2016. The healthcare-focused investment firm owned 324,270 shares at the end of March, which were worth $13.36 million. The contract research organization (CRO) that solely provides clinical development services for the biopharmaceutical and medical device industries has seen its market value gain 62% in the past 52 weeks. According to the investor letter, HealthInvest believes that “outsourcing of clinical development is a strong trend which will support future volumes for INCR”. Moreover, the Stockholm-based firm says that INC Research’s shares are “relatively inexpensive” considering that they trade “around 12x free cash flow”. A fresh article posted by Bloomberg says that Laboratory Corp. of America Holdings (NYSE:LH) is interested in acquiring INC Research Holdings, as the two parties have already discussed a possible deal. Reportedly, the health care diagnostics giant is seeking to strengthen its dominant position in the U.S. diagnostics industry. Ken Griffin’s Citadel Advisors LLC had 1.19 million shares of INC Research Holdings Inc. (NASDAQ:INCR) in its equity portfolio at the end of 2015.
Taro Pharmaceutical Industries Ltd. (NYSE:TARO)
– Number of shares held by HealthInvest Partners as of March 31: 94,005
– Value of HealthInvest’s holding as of March 31: $13.47 Million
HealthInvest Partners purchased a new stake of 94,005 shares in Taro Pharmaceutical Industries Ltd. (NYSE:TARO) during the January-to-March quarter, aggregately valued at $13.47 million on March 31. The quarter-end stake accounted for 6.31% of the fund’s equity portfolio. Tara Pharmaceutical is a science-based pharmaceutical company that has a debt-free balance sheet. The company paid-off its remaining debt of $5.9 million during the quarter that ended December 31. Tara’s net sales for the nine months ended December 31 reached $685.7 million, which represented an increase of 10.8% year-on-year. Meanwhile, net income for the nine-month period was $426.0 million, up from $332.0 million reported for the same period of the prior year. The shares of the pharmaceutical company are currently trading 10.7-times expected earnings, significantly below the forward P/E ratio of 15.3 for the healthcare sector. Just recently, the company’s Board also approved a $250 million share repurchase authorization, which may lead to an even more attractive P/E multiple. Shares of Taro Pharmaceutical are down by 3% year-to-date. Jim Simons’ Renaissance Technologies owned 451,200 shares of Taro Pharmaceutical Industries Ltd. (NYSE:TARO) at the end of 2015.