It’s been a tough run for Glenview Capital, the hedge fund run by billionaire Larry Robbins, which has endured two losing years in a row (an 18.1% loss in 2015 was followed by a 2.7% loss last year). However, Thermo Fisher Scientific Inc. (NYSE:TMO) has been a bright spot for the money manager, gaining 31.65% since the beginning of 2015, including a robust 19.12% this year.
That performance doubtlessly comes as little surprise to Robbins. As of the end of 2016, Thermo Fisher ranked as Glenview’s 12th-largest position out of 48 stocks in its portfolio, with it holding 3.66 million shares valued at over $516 million, and the stock was actually the fund’s top position at the end of 2014.
At Insider Monkey, we believe in mimicking smart money managers, but in a unique way; by focusing only on their best stock positions. Hedge funds are like many other companies in that they bundle products (in this case, stock picks) together and sell them to customers (investors) as a package deal. That means you get their 48th-best pick along with their best pick, and who wants to pay an arm and a leg in fees for a fund’s 48th-best idea (which in this case is Kindred Healthcare, which is off to a strong start in 2017, but is still down by over 31% in the past year)?
We are currently offering a no-questions-asked, 14-day money-back guarantee option on our premium newsletters, which include detailed breakdowns of hedge funds’ best performing picks, including those of Larry Robbins, who’s shown a penchant for generating strong returns from large-cap stocks like Thermo Fisher Scientific Inc. (NYSE:TMO). The billionaire discussed the stock while being interviewed at the Capitalize for Kids Investors Conference in Toronto last October, so let’s take a look at some of the reasons why he loves it.
Robbins first started by pointing out that Thermo Fisher is by no means the type of stock that the general public often perceives as being hedge fund (or at least activist fund) material. It’s not a distressed company that needs guidance or change; it’s one that Robbins says is operating on all cylinders, having posted impressive organic revenue growth of 7% in the fourth quarter of 2015, its highest total in five years at the time.
Organic growth has continued to remain strong, with the maker of scientific instruments and lab supplies delivering 11% revenue growth in the first quarter of this year, including 4% organic revenue growth. Robbins, who happened to pitch the stock at the same investors’ conference in 2014, likes the company’s track record of acquisitions, including its purchase of Life Technologies in 2014, which was a stock that Robbins was also invested in. In the first quarter of this year, acquisitions helped increase Thermo Fisher Scientific Inc. (NYSE:TMO)’s revenue by 8%, with its purchases of Affymetrix and FEI Company ranking as its most prominent of 2016. It also completed its acquisition of Finesse Solutions in February of this year, folding the company into its Life Sciences Solutions segment, which enjoyed 12% year-over-year revenue growth in Q1.
And while Robbins expressed that the company’s bottom-line growth has not been quite as strong as he would’ve liked, partially due to currency headwinds, the first quarter was an improvement in that regard, with GAAP diluted EPS jumping by 39% to $1.40 and GAAP operating margin rising by a full percentage point to 13.1%.
Robbins also loves that Thermo Fisher Scientific Inc. (NYSE:TMO) abstains from relying on massive amounts of leverage to fund its expansion, with the company’s debt to EBITDA standing at less than 3x as of Robbins’ interview, while its debt to adjusted EBITDA stood at 3.6x at the end of the first quarter.
Larry Robbins has been an investor of Thermo Fisher for the last 13 years, and that’s unlikely to change any time soon, which is why we believe it ranks as one of his best ideas, and the type of stock we look to identify and invest in.