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)

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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.

The stock of Valeant Pharmaceuticals Intl Inc (NYSE:VRX), a specialty pharmaceutical company, delivered returns of 38.8% during the first quarter of 2015. The company’s full year 2014 revenues increased by 43% in year-on-year terms to $8.3 billion, with the same store sales witnessing an organic growth of 13% during the same period. The company forecasts the same store sales organic growth of 10% to 15% for the first quarter of 2015. Valeant Pharmaceuticals Intl Inc (NYSE:VRX) announced the acquisition of Salix Pharmaceuticals for a total enterprise value of over $14.5 billion or $158.00 per share in cash, in February. According to the latest 13F filing, Mr. James decreased the fund’s stake in Valeant Pharmaceuticals Intl Inc (NYSE:VRX) by 24% during the fourth quarter of 2014 to 1.3 million shares valued at $180.4 million. Jeffrey Ubben’s ValueAct Capital and Andreas Halvorsen’s Viking Global are among other big shareholders shareholders in the company, owning 19.4 million shares and 9.1 million shares respectively.

The stake in Clovis Oncology Inc (NASDAQ:CLVS), a biopharmaceutical company engaged in developing and commercializing anti-cancer agents, represented 2.3% of the fund’s portfolio with 1.7 million shares valued at $96.6 million. The fund increased the exposure to Clovis Oncology Inc (NASDAQ:CLVS) by 36% in the fourth quarter of last year, while the stock appreciated by 32.55% during the first three months of 2015. Recently, the U.S. Food and Drug Administration (FDA), has approved Breakthrough Therapy designation for the company’s Rucaparib, which is being developed to treat the patients with advanced ovarian cancer. Among the hedge funds we track, William Leland Edwards‘ Palo Alto Investors owns 2.10 million shares, valued at $117.76 million.

Mr. James boosted his fund’s stake in Hologic, Inc. (NASDAQ:HOLX) by 498% during the fourth quarter of 2014, holding 3.3 million shares valued at $88.3 million at the end of last year. The investment paid off, as the stock rallied 23.5% in the first quarter of 2015, while over the last 52 weeks it is up by 56.5%. The company’s revenue for the first quarter of fiscal 2015 grew by 6.6% on the year to $652.8 million. Adjusted earnings per share rose 15.4% on a year on year basis to $0.39 in the first quarter of fiscal 2015, beating the consensus estimate of $0.36. Among the funds that we track, Carl Icahn’s Icahn Capital holds the largest long position that contains 34.15 million shares as of the end of 2014.

Disclosure: none