Top 5 Stock Picks of Matthew Halbower’s Pentwater Capital Management

4. PPD, Inc. (NASDAQ:PPD)

Pentwater Capital’s Stake Value: $497 million

Percentage of Pentwater Capital’s 13F Portfolio: 5.05%

Number of Hedge Fund Holders: 36

PPD, Inc. (NASDAQ:PPD) is a contract research firm, which, as the name suggests, acts as a third-party researcher for the medical industry. The company was acquired by Thermo Fisher Scientific Inc. (NYSE: TMO) in December last year for a $17.4 billion price tag.

Prior to the acquisition, which took place in Q4 2021, Mr. Halbower’s investment firm had owned 10.6 million PPD, Inc. (NASDAQ:PPD) shares that were worth $497 million in Q3 2021. Out of the 867 hedge funds polled by Insider Monkey for the three-month period ending in September last year, 36 had owned PPD, Inc. (NASDAQ:PPD) shares.

For its third fiscal quarter, PPD, Inc. (NASDAQ:PPD) brought in $1.56 billion in revenue and $0.43 in EPS, beating analyst estimates for both.

PPD, Inc. (NASDAQ:PPD)’s largest shareholder after Pentwater Capital was Israel Englander’s Millennium Management who owned 4.4 million shares worth $206 million.

Mentioning PPD, Inc. (NASDAQ:PPD) in its second-quarter 2021 investor letter, DEVON Equity Managemen outlined that:

“…We expect the ~US$4bn of ‘excess’ free cash flow generated from COVID related business to be reinvested into high returning businesses with a more sustainable earnings profile. This is already evident in Thermo’s strong M&A activity YTD, culminating in the US$20bn acquisition of PPD (PPD US).

PPD is a top tier CRO (Contract Research Organisation) which has been in and out of private equity ownership in recent times. To oversimplify, CRO’s effectively provide ‘outsourced’ R&D services across the entire customer spectrum (from big pharma to early stage biotech). Their value proposition varies slightly be customer, but ultimately comes down to quality of drug discovery / development and accelerating time to market (i.e. ‘Return on R&D investment’). CROs must stack up well on this metric vs in-house R&D spend, otherwise Firms would simply keep the spend 100% internal.”