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Healthcare Providers Push Past Biotech Stocks In Krishen Sud’s Portfolio

Krishen Sud’s Sivik Global Healthcare LLC has filed its 13F with the SEC for the end of second quarter reporting period and the filing reveals that healthcare providers have made their way past biotech stocks in his portfolio. The healthcare-focused investment manager reported a public equity portfolio valued at $288.19 million as of June 30. Krishen Sud is known for investing heavily in healthcare, and 91% of his overall portfolio was dedicated to healthcare stock picks as of the reporting period. Humana Inc (NYSE:HUM), Community Health Systems (NYSE:CYH), and Tenet Healthcare Corp (NYSE:THC) are the top three stock investments of Sivik Global, having replaced Gilead Sciences, Inc. (NASDAQ:GILD) and Actavis PLC, now Allergan PLC, which held the second and third positions in the previous quarter. It seems as if the recent Supreme Court ruling favoring the Affordable Care Act run by the federal government has had its effect on hedge fund holdings starting with Sivik Global Healthcare.

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Why are we interested in the 13F filings of a select group of hedge funds like Sivik? We use these filings to determine the top 15 small-cap stocks held by these elite funds based on 16 years of research that showed their top small-cap picks are much more profitable than both their large-cap stocks and the broader market as a whole. These small-cap stocks beat the S&P 500 Total Return Index by an average of nearly one percentage point per month in our backtests, which were conducted over the period of 1999 to 2012. Moreover, since the beginning of forward testing from August 2012, the strategy worked just as our research predicted, outperforming the market every year and returning 139% over the last 34 months, which is more than 80 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).

Krishen Sud
Krishen Sud
Sivik Global Healthcare

Humana Inc (NYSE:HUM) comes in at number one in the public equity portfolio of Krishen Sud, with the holding consisting of 69,700 shares valued at $13.33 million. The investment manager raised his stake in the healthcare service provider by 26% during the quarter. Humana Inc (NYSE:HUM) has received an acquisition offer from Aetna Inc (NYSE:AET) for $37 billion in cash and stock. If the acquisition receives regulatory approval, it will place the combined company second in the terms of the largest healthcare service providers in the US, trailing behind only UnitedHealth Group Inc (NYSE:UNH). However, antitrust regulators are likely to scrutinize the deal under strict guidelines because of the size of the merger. Some of the primary shareholders of Humana Inc (NYSE:HUM) at the end of the first quarter were Larry Robbins’ Glenview Capital and Cliff Asness’ AQR Capital Management, with the former holding 5.01 million shares of Humana valued at $893.04 million, and the latter having ownership of 1.93 million shares valued at $344.46 million.

The second-largest public equity investment of the fund manager is in Community Health Systems (NYSE:CYH), with an investment of $12.54 million from 199,100 shares. Krished Sud increased his stake in the healthcare company by 32% compared to three months earlier. The acute care service provider has witnessed 9.44% growth in its share price since the Supreme Court ruling, in addition to 12.2% growth year-to-date. Wall Street is estimating earnings per share of $0.88 for the second quarter compared to its first quarter earnings of $0.85. Glenview Capital and Jacob Doft’s Highline Capital Management are among some of the major stockholders of the company. At the end of the first quarter, Glenview Capital held 12.09 million shares of Community Health Systems (NYSE:CYH) with a market value of $632.26 million, whereas Doft held 2.13 million shares valued at $111.46 million in his portfolio.

Tenet Healthcare Corp (NYSE:THC) is another stock position to receive a boost from Sud during the second quarter, as the investment manager increased his stake in the company by 30% to a total of 189,100 shares valued at $10.95 million. Larry Robbins of Glenview Capital was among the top investment managers to increase his stake in Tenet Healthcare after the Supreme Court ruling. He added an additional 979,500 shares of the healthcare company to his portfolio, amassing a total of 14.79 million shares valued at $5.66 billion or 15% of the overall outstanding shares of the company. The Dallas, Texas-based healthcare company has witnessed 17.09% growth in its share price since the ruling and 15.69% growth year-to-date. The majority of analysts have rated the stock of Tenet Healthcare Corp (NYSE:THC) a ‘Buy’, with an average 12-month price target of $64.39, indicating upside potential of 9.71%. Richard Perry of Perry Capital was another major investor of the company, holding 1.58 million shares with a market value of $78.23 million at the end of the first quarter.

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