Edward Owens is a top-ranked health care investor who has managed the Vanguard Health Care Fund (VGHCX, Financial) since its inception in 1984. He has a long-term, valuation-oriented focus. In the last five years, Owens beat the S&P 500 with a 21.9% cumulative return versus its 1.1% loss. Over ten years, he achieved a 91.6% return compared to its 34.9% return.
Last quarter, Owens bought only one new health care stock. In the second quarter, he found two new opportunities and added to several others. The new buys are: Allscripts Healthcare Solutions Inc. (MDRX, Financial) and David Einhorn’s famous short, Green Mountain Coffee Roasters (GMCR, Financial). His two largest adds are Roche Holding (RHHBY, Financial) and Teva Pharmaceutical Industries (TEVA, Financial).
Owens bought 2,439,400 shares of new holding Allscripts Healthcare Solutions (MDRX) at an average price of $12 in the second quarter. Since his purchase the stock has dropped 26% to trade for $9 on Thursday.
Allscripts provides electronic solutions for health care providers. In April, its stock fell from $16 to under $11 when it lowered its 2012 guidance. Its original guidance was non-GAAP revenue of $1.62 billion to $1.65 billion, and non-GAAP diluted earnings per share $1.06 to $1.10. The newly revised guidance is for $1.48 to $1.52 billion in non-GAAP revenue and non-GAAP diluted earnings per share of $0.74 to $0.80.
The company said in its earnings release that it had lower than expected sales and that its investments in improving client experience and accelerating product development and higher than expected software development expenses pressured its bottom line. It gained three new clients in the quarter but also had a number of them postpone commitments while they waited for the company to introduce new releases and have better integration. Along with reorganization, these issues lowered sales.
This may be a temporary setback for a company whose top line has exhibited strong growth. In the last ten years, its revenue per share grew at an annual rate of 12.7%. Earnings growth has been slower, with a 2.5% EBITDA-per-share growth rate in the last five years. In the fourth quarter and full-year 2011, Allscripts had record bookings, accelerating revenue growth, strong earnings growth and record operating cash flow.
Owens bought 1.1 million shares of Green Mountain Coffee Roasters (GMCR) at an average price of $31 in the second quarter. Green Mountain is down 79% over the last year off its $115.98 high. The stock began to tank after David Einhorn gave his famous 110-slide PowerPoint against the company in October 2011.
The stock appeared that it was going in recovery in 2012, but a revised outlook for the year cut the price in half, from about $50 to about $25 in May. The company said it expects total net sales in the range of $3.79 billion to $3.84 billion and non-GAAP EPS in a range of $2.21 to $2.26 per diluted share for fiscal 2012. Analysts were expecting revenue of $3.87 billion and EPS of $2.37 for fiscal 2012, according to Reuters.
David Einhorn, in his second quarter letter, noted that the stock was his biggest winner in the second quarter. “The company announced disappointing quarterly results and lowered its guidance. Investors are beginning to consider the ramification of the coming K-cup patent expirations. Several leading retailers have indicated that they will take shelf space away from GMCR to make room for lower cost, private label K-cups. (In some instances, GMCR will supply the private label K-cups at a very low margin.) Recent store checks show that the price of K-cups is already falling – almost as fast as GMCR’s stock price.”
Owens bought 3,609,657 shares of Roche Holding (RHHBY) at an average price of $42 in the second quarter. Roche Holding is a pharmaceutical company with distribution in Europe, the U.S., Asia and Latin America.
Roche Holding has had considerable growth over the last decade. It grew revenue per share at an annual rate of 14.6% and EBITDA per share at an annual rate of 17.9%. The company’s cash flow also grew substantially, from $1 billion in 2000 to $12.9 billion in 2011. Net income also reached its highest level in 2011 at $10.2 billion.
In its first quarter of 2012, the company’s sales rose 1% in U.S. dollars over the previous year, with approvals for two new, first-in-class skin cancer medicines and five out of five late-stage clinical studies reporting positive results. The company also confirmed its full-year outlook for 2012 for pharmaceutical sales growth in the low to mid-single-digit rates.
Owens added 4.1 million shares of Teva Pharmaceutical Industries (TEVA) to his holding at an average price of $42, by far his largest purchase of the company he first bought shares of in the second quarter 2011, when it traded for $49 on average. Teva’s stock has slipped almost 6% over the last year.
Teva the largest generic pharmaceutical company in the world, marketing about 400 generic medications and 50 brand-name drugs, with approximately 180 new generics awaiting FDA approval. Teva has been growing its revenue and EBITDA per share a high average rate of 16% and 21.4% annually over the last decade. The company has $1.1 billion in cash on its balance sheet, but considerable long-term liabilities and debt of $13.6 billion. The company is also trading at a P/E of 12.29, lower than its pre-2011 levels.
Teva’s second-quarter results also showed growth and affirmed it is on the path toward meeting its goals for the 2012 year. Strong growth in both its branded and pharmaceutical drugs drove 19% year-over-year sales growth, lower than expectations, with 28% revenue growth in the U.S. and 16% growth in generic medicine after introducing four new generic drugs. Branded medicines were up 35%. Net revenues in Europe were flat, where generic drugs fell 12 percent due primarily to a stronger dollar, and branded drug sales grew 46%. The company derives 30% of its sales from Europe. Sales in the rest of the world increased 30%, driven by results of from its acquisitions and strong sales in several countries.
The top stocks in Owens’ portfolio are Merck & Co. (MRK, Financial), UnitedHealth Group (UNH, Financial) and Forest Laboratories (FRX, Financial).
See the rest of Edward Owens’ stock picks for the Vaguard Health Care Fund in the portfolio here.
Also check out the Undervalued Stocks, Top Growth Companies, and High Yield stocks of Edward Owens.
Last quarter, Owens bought only one new health care stock. In the second quarter, he found two new opportunities and added to several others. The new buys are: Allscripts Healthcare Solutions Inc. (MDRX, Financial) and David Einhorn’s famous short, Green Mountain Coffee Roasters (GMCR, Financial). His two largest adds are Roche Holding (RHHBY, Financial) and Teva Pharmaceutical Industries (TEVA, Financial).
Owens bought 2,439,400 shares of new holding Allscripts Healthcare Solutions (MDRX) at an average price of $12 in the second quarter. Since his purchase the stock has dropped 26% to trade for $9 on Thursday.
Allscripts provides electronic solutions for health care providers. In April, its stock fell from $16 to under $11 when it lowered its 2012 guidance. Its original guidance was non-GAAP revenue of $1.62 billion to $1.65 billion, and non-GAAP diluted earnings per share $1.06 to $1.10. The newly revised guidance is for $1.48 to $1.52 billion in non-GAAP revenue and non-GAAP diluted earnings per share of $0.74 to $0.80.
The company said in its earnings release that it had lower than expected sales and that its investments in improving client experience and accelerating product development and higher than expected software development expenses pressured its bottom line. It gained three new clients in the quarter but also had a number of them postpone commitments while they waited for the company to introduce new releases and have better integration. Along with reorganization, these issues lowered sales.
This may be a temporary setback for a company whose top line has exhibited strong growth. In the last ten years, its revenue per share grew at an annual rate of 12.7%. Earnings growth has been slower, with a 2.5% EBITDA-per-share growth rate in the last five years. In the fourth quarter and full-year 2011, Allscripts had record bookings, accelerating revenue growth, strong earnings growth and record operating cash flow.
Owens bought 1.1 million shares of Green Mountain Coffee Roasters (GMCR) at an average price of $31 in the second quarter. Green Mountain is down 79% over the last year off its $115.98 high. The stock began to tank after David Einhorn gave his famous 110-slide PowerPoint against the company in October 2011.
The stock appeared that it was going in recovery in 2012, but a revised outlook for the year cut the price in half, from about $50 to about $25 in May. The company said it expects total net sales in the range of $3.79 billion to $3.84 billion and non-GAAP EPS in a range of $2.21 to $2.26 per diluted share for fiscal 2012. Analysts were expecting revenue of $3.87 billion and EPS of $2.37 for fiscal 2012, according to Reuters.
David Einhorn, in his second quarter letter, noted that the stock was his biggest winner in the second quarter. “The company announced disappointing quarterly results and lowered its guidance. Investors are beginning to consider the ramification of the coming K-cup patent expirations. Several leading retailers have indicated that they will take shelf space away from GMCR to make room for lower cost, private label K-cups. (In some instances, GMCR will supply the private label K-cups at a very low margin.) Recent store checks show that the price of K-cups is already falling – almost as fast as GMCR’s stock price.”
Owens bought 3,609,657 shares of Roche Holding (RHHBY) at an average price of $42 in the second quarter. Roche Holding is a pharmaceutical company with distribution in Europe, the U.S., Asia and Latin America.
Roche Holding has had considerable growth over the last decade. It grew revenue per share at an annual rate of 14.6% and EBITDA per share at an annual rate of 17.9%. The company’s cash flow also grew substantially, from $1 billion in 2000 to $12.9 billion in 2011. Net income also reached its highest level in 2011 at $10.2 billion.
In its first quarter of 2012, the company’s sales rose 1% in U.S. dollars over the previous year, with approvals for two new, first-in-class skin cancer medicines and five out of five late-stage clinical studies reporting positive results. The company also confirmed its full-year outlook for 2012 for pharmaceutical sales growth in the low to mid-single-digit rates.
Owens added 4.1 million shares of Teva Pharmaceutical Industries (TEVA) to his holding at an average price of $42, by far his largest purchase of the company he first bought shares of in the second quarter 2011, when it traded for $49 on average. Teva’s stock has slipped almost 6% over the last year.
Teva the largest generic pharmaceutical company in the world, marketing about 400 generic medications and 50 brand-name drugs, with approximately 180 new generics awaiting FDA approval. Teva has been growing its revenue and EBITDA per share a high average rate of 16% and 21.4% annually over the last decade. The company has $1.1 billion in cash on its balance sheet, but considerable long-term liabilities and debt of $13.6 billion. The company is also trading at a P/E of 12.29, lower than its pre-2011 levels.
Teva’s second-quarter results also showed growth and affirmed it is on the path toward meeting its goals for the 2012 year. Strong growth in both its branded and pharmaceutical drugs drove 19% year-over-year sales growth, lower than expectations, with 28% revenue growth in the U.S. and 16% growth in generic medicine after introducing four new generic drugs. Branded medicines were up 35%. Net revenues in Europe were flat, where generic drugs fell 12 percent due primarily to a stronger dollar, and branded drug sales grew 46%. The company derives 30% of its sales from Europe. Sales in the rest of the world increased 30%, driven by results of from its acquisitions and strong sales in several countries.
The top stocks in Owens’ portfolio are Merck & Co. (MRK, Financial), UnitedHealth Group (UNH, Financial) and Forest Laboratories (FRX, Financial).
See the rest of Edward Owens’ stock picks for the Vaguard Health Care Fund in the portfolio here.
Also check out the Undervalued Stocks, Top Growth Companies, and High Yield stocks of Edward Owens.
