Arthur B. Cohen and Joseph Healey’s Healthcor Management LP recently filed its latest 13F with the SEC, disclosing its equity positions at the end of 2014. There has been a great deal of turnover among Healthcor’s top five picks, as only one pick from the previous quarter remains among its top choices. Meanwhile, three newly opened positions during the fourth quarter crack the top five.
As its name would suggest, Healthcor Management is a healthcare-focused hedge fund that was founded in 2005 by Cohen and Healey. The former is a “Tiger Cub”, who managed the healthcare investments of Julian Robertson’s Tiger Management from 1995 to 2000, while working as its managing director. Cohen later moved to SAC Capital Partners (now the family office Point72 Asset Management), working there until 2005. Healthcor was 93% invested in the healthcare sector at the end of 2014, with an equity portfolio valued at $1.79 billion.
One of those falling from the top five is Allscripts Healthcare Solutions Inc (NASDAQ:MDRX), which was previously Healthcor’s top pick, and still ranked fourth at the end of the third quarter, even after Healthcor slashed over 25% of its position near the end of the third quarter. In the fourth quarter, Healthcor completely closed the position.
Mallinckrodt PLC (NYSE:MNK) is the one stock that remains in Healthcor’s top five, and not only that, it remains its top pick for the second straight quarter, though it did trim the position by 27% during the fourth quarter, down to 1.33 million shares. Mallinckrodt was one of Healthcor’s best picks in 2014, as it opened a position on the specialty pharmaceuticals company during the first quarter. Mallinckrodt soared 92.7% for the year, and is up another 19.77% year-to-date. All told, shares are up 172.67% since the company’s IPO in the summer of 2013.
John Paulson’s Paulson & Co. has been one of the biggest beneficiaries of that tremendous growth, having held 5.64 million shares at the end of the third quarter of 2013, which are now worth 150% what they were at the time, a windfall of more than $400 million. Paulson & Co. is still the largest shareholder among funds we track with 9.01 million shares.
Gilead Sciences, Inc. (NASDAQ:GILD) is Healthcor’s top new pick, as it opened a position on the biotech company during the fourth quarter consisting of 1.25 million shares. Best known for its Hepatitis C drug Sovaldi, which had $10.3 billion is sales in and 2014, and the HIV treatment Stribild, Gilead is in the midst of a strong three year run, up 350% during that time. Unsurprisingly, it’s been one of the top healthcare stocks among the funds we track, as well as a favorite stock among billionaires. Overall fund ownership has increased to 13.2% from 11.9%, and Ken Griffin and Steve Cohen are among the billionaires with stakes in Gilead.
Pfizer Inc. (NYSE:PFE) is Healthcor’s third choice and another new position, which could indicate it feels a merger between Pfizer and Gilead is a possibility in the coming year, something that has been rumored in recent months, but is becoming less and less likely as Gilead’s market cap continues to blow up. Healthcor purchased 3.22 million shares of Pfizer during the fourth quarter, which proved to be the perfect time to get on board, as Pfizer has rebounded from its 52-week low in the middle of October to gain over 25% since then. Pfizer was also just behind Gilead among funds we track, with 11.7% fund ownership. Among them were Fisher Asset Management with 31.20 million shares at the end of 2014, and AQR Capital Management, with 13.93 million shares.
Valeant Pharmaceuticals Intl Inc (NYSE:VRX) comes in fourth, and is yet another new position, with 650,000 shares. Also a top pick of billionaire Andreas Halvorsen, Valeant was at the center of merger talks last year, as Bill Ackman’s Pershing Square took a large position in Allergan, Inc. (NYSE:AGN) and tried to convince them to sell themselves to Valeant. While that deal eventually fell through on a better offer being made by Actavis plc (NYSE:ACT), Valeant continued to be a potential merger candidate heading into 2015, with Zoetis Inc (NYSE:ZTS) considered a possibility, with Ackman taking a liking to that company near the end of the year.
In late February, Valeant did indeed announce an acquisition, agreeing to purchase Salix Pharmaceuticals, Ltd. (NASDAQ:SLXP) for $158 cash per share. The acquisition sent Valeant’s shares through the roof, up 41.12% year-to-date. Jeffrey Ubben, who now sits on Valeant’s Board of Directors is one of the biggest winners of that deal, as his fund Valueact Capital held 19.38 million shares of Valeant at the end of 2014, valued at $2.77 billion. Those shares have since appreciated by more than $1 billion.
Lastly is Agilent Technologies Inc (NYSE:A), which Healthcor owns a sizable number of call options on, with those options being the fifth-most valuable position in its portfolio. Healthcor had 1.80 million call options valued at $73.69 million if exercised, an increase of 260% from the previous quarter. Healthcor owned a small long position on Agilent of 239,500 shares at the end of 2014, which had been trimmed by 78% during the fourth quarter. Agilent dove to $41 from $55 at the end of October as the company was forced to revise downward its guidance for the fourth time in the past year at the time. Agilent has rebounded slightly since then, now trading at $42.47, but may have some work to do for Healthcor to be able to call in and profit from those options. Daniel S. Och also had a large stable of call options on Agilent, with 6.09 million options at the end of 2014, an increase of 481% from the end of the third quarter.
Disclosure: None
