Highlights From Viking Global’s Investor Letter: Alibaba Group Holding Ltd (BABA), Regeneron Pharmaceuticals Inc (REGN)

“Walgreens was our biggest loser this quarter, costing the funds 0.9%. As we outlined in our first quarter letter, when Walgreens was our biggest winner, the investment thesis hinges on the company’s increasing scale and opportunity for cost cutting. We are optimistic that it will extract operational efficiencies through its acquisition of Alliance Boots, the largest pharmacy chain and pharmaceutical distributor in Europe. The company’s stock sold off in the third quarter following a decision not to pursue  a tax inversion as part of the acquisition. In addition, two senior executives announced their resignation and the company restated long-term goals following disclosure of flawed forecasting assumptions in its pharmacy contracts with health insurers and other payers. Walgreens has since filled these two positions with executives who we view positively and welcomed a well-known activist investor to its board. We view the majority of the financial setbacks as transitory. While base earnings are lower than when we originally underwrote the investment, we have maintained our position given our belief that the upside from economies of scale and cost cutting remain largely unchanged.”

Don’t feel bad for Halvorsen. Walgreens shares rebounded 25% since the end of September. Viking Global’s investors made more than $300 million if the fund hasn’t trimmed its stake.