Viking Global’s Andreas Halvorsen (Trades, Portfolio) disclosed earlier this week he established a 6.26% stake in Change Healthcare Inc. (CHNG, Financial).
The guru’s Connecticut-based firm picks stocks based on its understanding of the business’ fundamentals and management team, as well as cyclical and secular industry trends. Halvorsen was a former protégé of Tiger Management’s Julian Robertson (Trades, Portfolio).
According to GuruFocus Real-Time Picks, a Premium feature, Halvorsen invested in 7.85 million shares of the Nashville, Tennessee-based health care technology company on March 3, allocating 0.51% of the equity portfolio to the position. The stock traded for an average price of $13.89 per share.
The company, which offers a suite of software, analytics and technology-enabled services and network solutions to health care payers and providers, has a $1.5 billion market cap; its shares were trading around $12.31 on Wednesday with a forward price-earnings ratio of 8.83 and a price-book ratio of 0.89.
The price chart shows the stock has fallen nearly 20% since its initial public offering last June.
On Feb. 12, the company reported its third-quarter 2020 financial results, posting adjusted earnings of 33 cents per share on $808.2 million in revenue. Adjusted earnings before interest, taxes, depreciation and amortization came in at $232.6 million, while adjusted net income was $106.3 million. Change Healthcare also noted that it adopted new revenue recognition accounting standards in April 2019, which impacted its historical performance.
In a statement, President and CEO Neil de Crescenzo praised Change’s performance, highlighting its “momentum and success.”
“Positive trends in the market for innovation and operational efficiency are continuing to drive demand for existing and new solutions, which are leveraging our investments in artificial intelligence, API’s and native cloud-based initiatives,” he said. “We believe we are well-positioned to drive growth throughout the remainder of Fiscal 2020 and beyond supported by a healthy pipeline, and we look forward to partnering with our customers to reduce cost, increase quality, and enhance their ability to drive consumer engagement."
For the fourth quarter, the company guided for revenue in the range of $775 million to $785 million, adjusted Ebitda between $260 million and $270 million and adjusted net income of $115 million to $125 million.
For the full year, Change anticipates sales in its Solutions division to grow 1% to 2%, adjusted Ebitda to increase 6% to 8% and adjusted net income to gain between 9% and 11%.
Weighed down by debt and negative returns on equity and assets, GuruFocus rated Change’s financial strength 4 out of 10 and its profitability 1 out of 10.
Halvorsen is now the company’s largest guru shareholder. During the fourth quarter of 2019, NWQ Managers (Trades, Portfolio) established a position in the stock, while Steven Cohen (Trades, Portfolio) reduced his stake. The Vanguard Health Care Fund (Trades, Portfolio) and Pioneer Investments (Trades, Portfolio) also hold the stock.
Portfolio composition
More than 30% of Halvorsen’s $21.35 billion equity portfolio, which was composed of 66 stocks as of the end of fourth-quarter 2019, is invested in the health care sector. He has smaller holdings in the technology (20.53%) and consumer cyclical (18.20%) spaces.
Biotechnology companies make up the majority of his holdings in the health care industry, followed by health care plans and diagnostics and research.
Other health care providers the guru’s firm is currently invested in are Covetrus Inc. (CVET, Financial) and 10x Genomics Inc. (TXG, Financial).
Disclosure: No positions.
Read more here:
- Chuck Royce's Firm Sails Away With OneWater Marine
- 5 Energy Companies to Consider as Markets Continue to Tumble
- IVA International Fund Adds 6 Stocks to Portfolio
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
