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Glenview Capital Boosts Stake in HealthSouth Corp (HLS) to 6.5%

Glenview Capital, led by Larry Robbins, is bullish on HealthSouth Corp (NYSE:HLS) and has raised its stake to 5.90 million shares from 1.70 million shares. According to a filing with the SEC, the position is passive by nature and represents 6.46% of the company’s common stock. HealthSouth Corp (NYSE:HLS) is engaged in providing post-acute healthcare services. Glenview Capital initiated its position in the company during the first quarter of 2015.

GLENVIEW CAPITAL

Glenview Capital was founded by Larry Robbins in 2000. Previously, Robbins worked as a trader at Leon Cooperman’s Omega Advisors. Glenview Capital returned 301% after fees and expenses between January 2001 and December 2010. During the peak of the financial crisis in 2008, the hedge fund lost about 50%, but quickly got back on its feet the following year, when it posted gains of 82.7%. The market value of Glenview Capital’s public equity portfolio totaled $21.9 billion at the end of March 2015. The fund loves to invest in healthcare stocks, which represents 36% of the fund’s holdings.

Larry Robbins
Larry Robbins
Glenview Capital

We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular stock picks in real time since the end of August 2012. These stocks have returned 123% since then and outperformed the S&P 500 ETF (SPY) by around 67 percentage points (see more details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.

Alabama-based HealthSouth Corp (NYSE:HLS) is a provider of both facility-based and home-based post-acute services in 33 states and Puerto Rico. It has a network of inpatient rehabilitation hospitals, home health agencies, and hospice agencies. The market cap of the company is $4.18 billion.

Recently, HealthSouth Corp (NYSE:HLS) signed an agreement to acquire the operations of Reliant Hospital Partners, LLC and affiliated entities for $730 million in cash. Reliant is an operator of a portfolio of 11 inpatient rehabilitation hospitals in Texas, Massachusetts and Ohio. It also operates three inpatient satellite locations in Massachusetts, according to a news release. The deal, approved by both companies’ boards of directors, is expected to close in 2015.

HealthSouth Corp (NYSE:HLS) posted strong financial results for the second quarter ended June 30, 2015. The company’s revenues increased by 26.5% on the year to $764.40 million. Income from continuing operations attributable to HealthSouth Corp (NYSE:HLS) was $0.47 per share, versus $0.81 for the second quarter last year. Adjusted EBITDA for the quarter was $169.5 million, up from $152.7 million in the same period last year. Last month, HealthSouth Corp (NYSE:HLS)’s board of directors approved a 9.5% increase in the company’s quarterly common stock dividend to $0.23 per share. For a full-year 2015, HealthSouth Corp (NYSE:HLS) revised its EPS guidance to a range of $2.11 to $2.17 per share from $2.13 to $2.19 per share, to include about $3 million of transaction costs incurred to date related to its pending acquisition of Reliant. The stock has gained almost 18% since the beginning of the year.

Among the investors we track at Insider Monkey, another shareholder of HealthSouth is Mariko Gordon’s Daruma Asset Management, which held 1.95 million shares of HealthSouth Corp (NYSE:HLS), followed by Osterweis Capital Management, led by John Osterweis, which owns 1.14 million HealthSouth Corp (NYSE:HLS) shares as of the end of March 31.

Disclosure: none

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