The purchase of the Spanish number one bank Banco Santander is not surprising. It is in the same group of other financials bought by Bruce Berkowitz: AIG, CIT, Bank Of America Corp (BAC), Regions Financial (RF) etc. These are the distressed financials that others hate but Bruce Berkowitz loves.
But the position in Teva Pharmaceutical is surprising. TEVA Pharmaceuticals USA, the business is to develop, manufacture, and market generic pharmaceuticals. His purchase prices were between $49.94 and $55.52, with an estimated average price of $52.58. The impact to his portfolio due to this purchase was 0.07%. His holdings were 177,400 shares as of 11/30/2010.
Teva belongs to an industry that Bruce Berkowitz was getting out, as he sold out almost all of his health care stocks. In the most recent quarter, he sold out Humana Inc. (HUM), which was the last health care service company he owned.
Does Teva belong to the high quality undervalued stocks that Bruce Berkowitz used to invest in?
The consistency of Teva’s business performance earned the company a rank of 4-star in business predictability. This is the performance of revenue and earnings over the past 10 years:
The company has grown its revenue at about 17% a year, and earnings at more than 20% a year. The free cashflow from the company has grown to more than $3 billion. This is the free cash flow of Teva over the past 10 years. (All these charts are available to the 10-year financial pages of Teva)
Teva is in the portfolio of a lot of hedge fund gurus: John Griffin of Blue Ridge Capital, George Soros of Soros Fund Management LLC, Lee Ainslie of Maverick Capital, Steven Cohen of SAC Capital Advisors. At around $51 a share, the stock is not particularly cheap. But the company is generating a lot of cashflow, and growing at attractive rate.
What does Bruce Berkowitz see Teva? We would like to hear your comments.