Andreas Halvorsen Keeps Buying DVA, HLT, ACT

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Apr 10, 2015

Andreas Halvorsen (Trades, Portfolio) is a founding partner of Viking Global Investors LP and currently serves as its CIO. Viking was formed in 1999 and is based in Greenwich, Connecticut. Viking manages two hedge funds invested in equities worldwide.Ă‚

Prior to founding Viking, Mr. Halvorsen was a senior managing director and the director of equities at Tiger Management LLC. He also worked as an investment banker in the corporate finance and merger departments of Morgan Stanley. Prior to moving to the United States, Mr. Halvorsen graduated from the Norwegian Naval Academy and served as a platoon commander on the Norwegian SEAL Team.Ă‚ Mr. Halvorsen received his MBA from the Stanford Graduate School of Business in 1990 and graduated from Williams College in 1986. Since starting his firm Viking Global in 1999, his Viking Global Equities III fund has gained 22% on average per year until March 2009. His largest down period was from Sept. 2001 to March of 2002, when his portfolio was down about 12%.

Web Page: https://www.vikingglobal.com

His portfolio is composed of 62 stocks and has a total value of $21,780 Mil. DaVita HealthCare Partners Inc (DVA), Hilton Worldwide Holdings Inc (HLT) and Actavis PLC (ACT) are the stocks that the Investor is continuously buying over the past quarters.

DaVita HealthCare Partners Inc (DVA)

DVA has a market cap of $17.59 billion and Mr. Halvorsen had owned the stock since 2010Q1. On 2013Q1 and Q2 he sold out his position after he got gains of 30.6% to 128%. After 4 months, he started to buy DVA again, adding shares every quarter while the price of the stock was growing. Now he holds 4,466,740 shares at an average price of $66.51/share with an average gain of 23%.

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DVAĂ‚ is currently trading at P/E (ttm) of 24.40 at very cheap level compared to the Global Medical Care industry that has an Average P/E of 56.40. The price rose by 18% over the last 12 months.

At current price, based on DCF model, DVA fair value is $ 58.76, and these days the stock is trading with a negative margin of safety of -39%.

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The company has positive returns (ROE of 15.05%, ROA of 4.09% and ROC of 68.25%) and good Financial Strength rated 7/10; Cash to Debt ratio is 0.15 at worst levels compared to DVA history (best Cash to Debt ratio was 3.35 reached more than 10 years ago) and at average level of DVA’s Industry (Industry Median of 0.21).

Over the last 5 years, the company's revenue grew by 16.90%, EBITDA grew by 15.20%, Book Value by 21.03% and EPS growth rate is 11.20%. These growing ratios last since 10 years back and they are confirmed even during the last 12 months (the only change is the Free Cash Flow that during the last 12 months dropped by 29.80%.

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During the Q4 2014 Earning Call, Garry Menzel, CFO expects for the 2015 an increase of the effective tax rate from 33.3% to the range 39.5% / 40.5% and “…operating cash flow to be between $1.5 billion and $1.7 billion, lower than 2014 but in line with our historical trends.” He also stated that they are constantly reviewing their capital allocation to be sure to have a long-term health of the organization.

Warren Buffett is the main Guru holding DVA with 17.87% of shares outstanding. Andreas Halvorsen holds 2.07% of Shares Outstanding followed by Steve Mandel (1.83%) and Alan Fournier who holds 1.04% of Outstanding Shares of the Company.

Hilton Worldwide Holdings Inc (HLT)

HLT has a market cap of $30.62 billion and the Investor started to buy it on 2014Q2. Then he added shares every quarter, reaching now a total of 16,542,046 shares held, at an average price of $24.93/share with an average gain of 25%.

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HLT is currently trading at P/E (ttm) of 44.90 at very cheap level compared to the Global Lodging industry which has an Average P/E of 52.30. The price rose by 47% over the last 12 months.

At current price, based on DCF model, HLT fair value is $10.03, so at current prices the stock is heavily Overpriced by 195%.

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The company has positive returns (ROE of 14.46%, ROA of 2.55% and ROC of 18.48%) and average Financial Strength rated as 5/10. Each important ratio (Cash to Debt, Equity to Asset and Interest Coverage) are at same levels of HLT’s average competitor, but while Equity to Asset (0.18) and Interest Coverage (2.71) never been so high on recent HLT’s History, the ratio Cash to Debt (0.05) is not doing that well, compared to recent History of HLT. In fact, the company closed the year 2010 with No Debts.

Over the last 12 months, the company's revenue didn’t change much (+1.10%) while EBITDA grew by 16.80%, EPS by 47.80% and Book Value grew by 9%.

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During the Q4 2014 Results- Earnings Call, CEO Chris Nassetta stated “Overall our anticipated growth rates for 2015 around the world are largely stable to increasing compared to last year, that leads us to be optimistic about the year expecting a system wide RevPAR increase of 5% to 7%, about two-thirds of that driven by rate.

We continue to expect net unit growth of 40,000 to 45,000 rooms for the year or 6% to 7% increase in management franchise rooms. Our adjusted EBITDA guidance for 2015 is $2.79 billion to $2.87 billion reflecting the sale of the Waldorf Astoria New York, the subsequent completion of the 1031 exchanges and changes to our adjusted EBITDA presentation which Kevin will cover in more detail shortly.”

Andreas Halvorsen is the main holder of HLT with 1.68% of Shares Outstanding, followed by Ron Baron and NWQ Managers with 0.19%.

Actavis PLC (ACT)

ACT has a market Cap of $79.59 billion and Mr. Halvorsen bought the stock for the first time in 2013Q2. He now holds 4,585,892 shares at an average price of $202.31/share with an average gain of 44%.

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ACT is currently trading at P/E (ttm) of 14.12 and over the last 12 months, the price rose by 53%.

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The company has negative returns (ROE of -9.45%, ROA of -4.61% and ROC of -38.64%) and even the Financial Strength rated 4/10 is giving weak ratios. Cash to Debt is 0.02, underperforming the sector that has an Average ratio of 2.25;

Despite negative returns and weak financials, over the last 5 years, the company's revenue grew by 22.30 %, EBITDA grew by 3.80%, Free Cash Flow grew by 24.10% and the Book value grew by 31.70%.

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President and CEO, Brent Saunders, is convinced that 2015 will be another very strong year for Actavis. They forecast to increase their non-GAAP EPS to $16.30 to $17.30 (from $15.60 to $16.80).

He also expects “.. total net revenue to be approximately $15 billion following adjustments for the Durata and Auden Mckenzie acquisitions and the respiratory Doryx and Pharmatech divestitures. We expect that our non-GAAP R&D investment will be approximately $1.1 billion and SG&A as a percent of revenues will be approximately 19% by year-end”

Vanguard Health Care Fund is the main Guru holding ACT with 3.3% of shares outstanding. Andreas Halvorsen is the second one with 1.72% followed by Daniel Loeb with 1.3%