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Halvorsen of Viking Global Increases Stake in Universal Health Services Inc.

April 21, 2011 | About:
Stockopedia

Holly LaFon

250 followers
On March 30, Andreas Holversen’s $12 billion hedge fund, Viking Global, filed a 13G for acquiring shares of their second reported stock for the first quarter of 2011. The firm increased their stake in Universal Health Services Inc. (UHS) by 71.78%, at the average price of $48.79 per share, bringing their total shares to 5,343,992. Halvorsen, a former equities director at Tiger Management, had a disappointing 2010, with returns of less than 3% through early December, compared to some of his fellow tiger cubs, such as Bill Ackman’s Pershing Square, which was up 35.5% through November. In his second-quarter of 2010 investor letter, he noted that his team would be “increasing exposure to our highest conviction longs. As a result, I believe we will act with more urgency as trade-offs have to be made continuously between new ideas and exiting positions.” He added, “If market, economic, political or regulatory factors dictate, we will reduce leverage as we see appropriate, yet we will strive to retain significant concentration in our best ideas … To conclude this discussion, I should emphasize that our firm goals are embraced by all analysts and portfolio managers.”

Universal Health Services Inc. comprises approximately 1.8% of Viking’s portfolio, and they now own 5.9% of the company. Universal Health Services is one of the largest health care management companies in the nation, franchising through building or purchasing healthcare properties. Universal Health Services has a market cap of $4.62 billion; its shares were traded at around $47.43 with a P/E ratio of 18.7 and P/S ratio of 0.8. The dividend yield of Universal Health Services Inc. stocks is 0.4%. Universal Health Services Inc. had an annual average earnings growth of 16.8% over the past 10 years. GuruFocus rated Universal Health Services Inc. the business predictability rank of 3.5-star.

Viking Global has traded Universal Health Services shares intermittently over the past several years. In 2006, it reduced its position to 0, but bought 586,000 shares at $25.27 per share in the first quarter of 2008, and sold them in the second quarter, when the stock was up to $30.51 per share. In the first quarter of 2009, the stock fell to $18.70 per share, and the firm initiated a position again at 889,000 shares. Since then, they have never sold out, but sold 1,189,700 shares in the fourth quarter of 2010 when the price rose to $40.68.

The stock price has continued to rise since then, reaching its all-time high of $51.18 per share in early April. GuruFocus’ Fair Value Calculator indicates that the stock is overvalued, and a more appropriate value is $26.21 per share.

On Feb. 28, 2011, Universal Health Services reported net income of $37.2 million, or $.38 per diluted share in the fourth quarter of 2010, compared to $60.9 million, or $.62 per diluted share in the same quarter of 2009. Net revenues increased 21% to $1.56 billion in the fourth quarter 2010 from $1.29 billion in the fourth quarter 2009. The company attributed the increase to revenue generated from Psychiatric Solutions Inc., which it acquired in November 2010. The company had net operating margins of 4.10% in 2010, 5.0% in 2009, and 4.0% in 2008.

Universal Health projected a range of earnings per diluted share for 2011 is $3.50-$3.65 and net revenues of $7.6 billion-$7.7 billion. In 2010, revenues increased to $5.57 billion from $5.2 billion during 2009.

Universal Health Services is also in the portfolios of George Soros, Chris Davis, Edward Owens and Private Capital.


Rating: 3.0/5 (11 votes)

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