Cooper Investors, an independently-owned investment firm, recently published its first-quarter Global Equities Fund (Hedged) commentary – a copy of which can be downloaded here. During the first quarter of 2020, the Cooper Investors Global Equities Fund (Hedged) returned -18.98%, while the benchmark MSCI ACWI was down 19.97%.
In the said letter, Cooper Investors highlighted a few stocks and Cerner Corp (NASDAQ:CERN) is one of them. Cerner is a global healthcare technology company. Year-to-date, CERN stock lost 7.4% and on April 30th it had a closing price of $69.39. Its market cap is of $20.7 billion. Here is what Cooper Investors said:
“Early in the quarter, the portfolio established a position in Cerner, a leading Healthcare IT vendor which provides software and related services to hospitals and physicians.
Cerner was founded in 1979 and until a few years ago the company was run and managed by its founders. Whilst they did a fantastic job building a global leader in Healthcare IT there was evidence that the company had started to lack some of the necessary disciplines around appropriate growth avenues and focus on the cost base.
Current CEO Brent Shafer was appointed in 2018 and this coincided with a handful of high calibre appointments to the Board and a significant refresh of the senior management team. Cerner are now holding themselves accountable in getting operating margin expansion to levels in line with peers, improvement in Free Cash Flow via reduced capex and a more appropriate capital return program, which includes initiating a dividend.
The core of Cerner’s offering is their Electronic Health Records system which is the backbone of how digital patient health information is recorded and shared across different health care settings. Cerner are the leader in this market which is an effective duopoly in the US, and also have a number of attractive and fast growing businesses which leverage their leading position in Electronic Health Records.
This includes software used for population health management where hospitals are incentivised on patient outcomes as opposed to volumes, a growing area which helps contain system costs. There are also exciting opportunities to leverage their unique health data into other applications so overall we see a sustainable mid-single digit revenue growth opportunity for the company.
In summary, we see an advantaged business with a net cash balance sheet and a refreshed management team looking to execute value latencies across growth, margins, capital efficiency and capital return.”
In Q4 2019, the number of bullish hedge fund positions on CERN stock decreased by about 11% from the previous quarter (see the chart here).
Disclosure: None. This article is originally published at Insider Monkey.
