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Graham Griffin
Graham Griffin
Articles (164) 

Larry Robbins' Firm Cuts Back Tenet Healthcare Holding

First shares sold in seven years

Larry Robbins (Trades, Portfolio)'s Glenview Capital Management has revealed a reduction in its holding of Tenet Healthcare Corp. (NYSE:THC), according to GuruFocus' Real-Time Picks, a Premium feature.

Founded in 2000, Glenview Capital Management operates as a privately held investment firm. It is focused on delivering attractive absolute returns through an intense focus on deep fundamental research and individual security selection. The firm's investments are primarily focused on the U.S., with a smaller amount of exposure in western Europe.

Throughout the last seven years, the firm has consistently added to the health care holding. Prior to the most recent reduction, shares were sold one time in the second quarter of 2013. At that time four million shares were sold to reduce the holding by 28.90%.

On Dec. 15, the firm sold an additional 1.20 million shares to reduce the holding by 6.07%. On the day of the transaction, the shares traded at an average price of $41.01. The sale had an overall impact of -1.54% on the equity portfolio and GuruFocus estimates the firm has gained a total of 40.67% on the holding during its lifetime.

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Tenet Healthcare is a Dallas-based health care provider operating a collection of 65 hospitals and many outpatient facilities. These facilities include ambulatory surgery centers, urgent care centers, freestanding imaging centers, freestanding emergency rooms and micro-hospitals and physician practices across the United States. Tenet enjoys the number-one ambulatory surgical center position nationwide through its nearly full stake in United Surgical Partners International.

As of Dec. 18, the stock was trading at $40.53 with a market cap of $4.28 billion. The GF Value Line shows that the stock is trading at a significantly overvalued level.

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GuruFocus gives the company a financial strength rating of 3 out of 10, a profitability rank of 5 out of 10 and a valuation rank of 7 out of 10. There are currently three severe warning signs issued for poor financial strength, declining revenue per share and an Altman Z-Score of 0.88 placing the company in the distress column. The company has maintained positive free cash flow after struggling for several years, yet net income has slipped into negative numbers.

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The firm is the top shareholder with 17.59% of shares outstanding. Other top shareholders include BlackRock Inc. (Trades, Portfolio), Vanguard Group Inc. (Trades, Portfolio), Harris Associates LP (Trades, Portfolio), State Street Corp. (Trades, Portfolio) and Goldman Sachs Group Inc. (Trades, Portfolio).

Portfolio overview

At the end of the third quarter, the portfolio contained 45 stocks, with seven new holdings. It was valued at $3.19 billion and has seen a turnover rate of 4%. Tenet Healthcare is the firm's largest holding, followed by Takeda Pharmaceutical Co. Ltd. (NYSE:TAK), Bausch Health Companies Inc. (NYSE:BHC), Cigna Corp. (NYSE:CI), HCA Healthcare Inc. (NYSE:HCA) and McKesson Corp. (NYSE:MCK)

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By weight, the top three sectors represented are health care (74.25%), technology (9.81%) and consumer cyclical (5.95%).

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Disclosure: Author owns no stocks mentioned.

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