1. How to use GuruFocus - Tutorials
  2. What Is in the GuruFocus Premium Membership?
  3. A DIY Guide on How to Invest Using Guru Strategies

What Does Bruce Berkowitz See from Teva Pharmaceutical?

February 10, 2011 | About:

As we update the latest purchases of Fairholme Fund, we found that Bruce Berkowitz bought into two new positions. One is Banco Santander S.a. (STD), the other is Teva Pharmaceutical Industries Ltd. (NYSE:TEVA).

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. (NYSE: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.

About the author:

Charlie Tian, Ph.D. - Founder of GuruFocus. You can now order his book Invest Like a Guru on Amazon.

Rating: 2.9/5 (14 votes)


Bogie33 - 6 years ago    Report SPAM
What he sees in Teva is actually an undevalued company!! You say at 17 PE but with 3 Billion in cash. They can continue to expand either thru future intergration, organically or partnership. The last quqrter was very overall but the nitpickers expect 100% perfection, why is 17 to 20% growth and increased cash flow not good enough??? Some people just have to get out of the way and that's what Berkowitz

is seeing
Knowledge - 6 years ago    Report SPAM
My guess is he also sees the trend continuing. One thing Berkowitz has mentioned is analyzing the odds that an outcome will happen. For TEVA, the odds of them continuing their growth rate are pretty good. There are A LOT of major drugs that are going generic over the next 2-4 years and that means, by default almost, that their pipeline is huge. TEVA estimates their revenues will be almost 2x in 5 years and with all of those drugs going generic, they may be right.
Blogging About Money
Blogging About Money - 6 years ago    Report SPAM

The golden era is ending for the blockbuster drugs within PFE, MRK, etc. Many multi-billion dollar drugs are now coming off patent, which should lead to gains for TEVA, being a huge generic drugmaker. This doesn't mean of course that PFE and MRK are stocks to sell necessarily. I like PFE, as its price is already overcompensating for losses in patents.

Please leave your comment:

GuruFocus has detected 4 Warning Signs with Teva Pharmaceutical Industries Ltd $TEVA.
More than 500,000 people have already joined GuruFocus to track the stocks they follow and exchange investment ideas.

Performances of the stocks mentioned by gurufocus

User Generated Screeners

star1907Rule #1
star1907C3 20% Growth 5 yr
EhrlingerT. Rowe Price Group
NorvasP/S good growers
danaltstreamMPB EY
AxelSalonenGrowth & True Value
gelayor65All Stocks With Blackrock Sell
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)

GF Chat