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Microsoft Corporation (MSFT), Valeant Pharmaceuticals Intl Inc (VRX): Partner Fund Management’s Winning Bets in Healthcare and Tech

Headquartered in San Francisco, Partner Fund Management was established in 2004 by Christopher Medlock James. Based on its latest 13F filing, the fund revealed 86 long positions, mainly from healthcare and technology sectors, which accounted for 52% and 21% of the total value respectively. For the first quarter of 2015, the fund had a weighted average return of 10.5% in its  78 long positions in companies with a market cap of over $1.0 billion. Partner Fund’s equity portfolio value increased by 0.99% to $4.3 billion in the fourth quarter of 2014, as compared to the previous quarter.

Vulcan Materials Company (NYSE:VMC)

Insider Monkey follows the investment picks of billionaire investors and hedge funds and our research has indicated that this system is very efficient at identifying investment opportunities in the small-cap space. Our back tests for the period from 1999 through 2012 indicated that the 15 most popular small-cap stocks among hedge funds, outperformed the S&P 500 Total Return Index by nearly a percentage point per month. Moreover, these picks posted returns of 132% in the last 2.5 years, beating the S&P 500 ETF (SPY)’s gains by approximately 80 percentage points (read more details here).

Partner Fund’s top three picks posted an average return of 18.5% in the first quarter of 2015, as compared to 0.9% appreciation of the S&P 500 ETF (SPY) during the same period. Vulcan Materials Company (NYSE:VMC), Microsoft Corporation (NASDAQ:MSFT), and Valeant Pharmaceuticals Intl Inc (NYSE:VRX) represent the fund’s largest holdings as of the end of last year.

The fund’s largest position is represented by Vulcan Materials Company (NYSE:VMC), in which Partner Fund Management holds 4.3 million shares worth $283.3 million. Mr. James decreased the fund’s exposure in this $10 billion market cap company by 7% during the fourth quarter of 2014. However, the company’s stock gained 28.4% in the first quarter of 2015, amid the news of strong quarter results, dividend increase and analyst upgrades. Vulcan Materials Company (NYSE:VMC)’s fourth quarter revenue increased by 8% on the year to $755 million, boosted by volume growth of aggregates, and surpassed the analysts’ estimates of $696 million. Earnings from continuing operations for the same period surged to $0.29 per share, as compared to $0.07 in the fourth quarter of 2013. On February 27, the company increased the quarterly dividend by $0.04 to $0.1 per share. Moreover, several analysts, including RBC Capital, Zacks and Stifel Nicolaus have raised their price targets on Vulcan Materials Company (NYSE:VMC)’s stock. Other major shareholders in Vulcan Materials are Jean-Marie Eveillard’s First Eagle Investment Management and Lee Ainslie’s Maverick Capital with 4.60 million shares and 2.83 million shares respectively.

Next in line is Microsoft Corporation (NASDAQ:MSFT), in which the fund holds a stake equal to 6.11% of its equity portfolio, valued at $261.83 million. While Mr. James increased the fund’s exposure in Microsoft by 93% in the fourth quarter of 2014 to 5.64 million shares, the stock declined 11.8% during the first quarter of 2015, amid the reports of decreasing demand for the firm’s Windows Operational System. However, the firm’s cloud businesses is doing well, with its commercial cloud revenue increasing by an annual 114% in the second quarter of fiscal 2015 (ended Dec. 31), boosted by Azure, Office 365 and Dynamics CRM Online. Jeffrey Ubben’s ValueAct Capital is a major investor in the company holding 74.24 million shares worth $3.45 billion. Other major shareholders of Microsoft Corporation (NASDAQ:MSFT) are Jean-Marie Eveillard’s First Eagle Investment Management with 36.23 million shares and Boykin Curry’s Eagle Capital Management holding 32.13 million shares.

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