A freshly-filed Form 4 with the U.S. Securities and Exchange Commission disclosed that Larry Robbins’ Glenview Capital acquired 500,000 shares of Tenet Healthcare Corp. (NYSE:THC) at an average price of $48.39 per share, lifting its holding to 15.99 million shares. Earlier this month, Glenview Capital also disclosed purchasing 697,917 shares of the company, so the recent acquisitions clearly suggest Larry Robbins’ confidence in the future outlook of Tenet.
Glenview Capital Management is a New York-based hedge fund founded in 2001 by Larry Robbins, who named the fund after the Chicago suburb where he used to play hockey as a child. The investment firm’s assets under management have increased to $11.8 billion from $4.5 billion back in 2012. Many believe that Robbins made an excellent bet on the significance of Obamacare, which was seen as a catalyst for M&A activity. Reportedly, Glenview Capital has realized paper gains of over $3.2 billion since the fund started betting on hospitals and insurers four years ago, mainly on expectations that consolidation in the industry was approaching. Robbins’ flagship fund has generated an average annual return of 26% since the beginning of 2012. As stated by the fund’s 13F filing for the June quarter, Glenview Capital manages a public equity portfolio worth $25.25 billion as of June 30, with a sizable 46% of that wealth invested in healthcare stocks.
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We follow hedge funds like Glenview Capital because our research has shown that their stock picks historically managed to generate alpha even though the filings are up to 45-days delayed. We used a 60-day delay in our back tests to be on the safe side and our research showed that the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Total Return Index by an average of 95 basis points per month between 1999 and 2012. After adjusting for risk, our calculations revealed that these stocks’ monthly alpha was 80 basis points. We have also been sharing and tracking the performance of these stocks since the end of August 2012, during which time they have returned 118%, outperforming the S&P 500 ETF by over 60 percentage points (see more details here).
Tenet Healthcare Corp. (NYSE:THC) is a healthcare services company that primarily operates acute care hospitals and related healthcare facilities in the United States. The shares of Tenet have embarked on a strong downtrend since mid-July, and have now lost nearly 9% year-to-date. It’s not quite evident what stands behind the stock’s free-fall, but Larry Robbins and his team seem to believe that the downtrend is transitory. In the meantime, Israel Englander’s Millennium Management, one of the hedge funds we track, substantially boosted its stake in Tenet Healthcare during the second quarter, building up a stake of 1.69 million shares.
