Following a reduction in February, Glenview Capital Management's Larry Robbins (Trades, Portfolio) disclosed earlier this week he curbed his stake in Tenet Healthcare Corp. (THC, Financial) by another 15.41%.
Striving to deliver attractive absolute returns, the guru's New York-based hedge fund focuses on deep fundamental research and individual security selection. It operates the Glenview Fund, which is a long-short strategy, and the Glenview Opportunity Fund, which is more concentrated. Most of its investments are in U.S. stocks, but it does have some exposure to Western Europe as well.
According to GuruFocus Real-Time Picks, a Premium feature, Robbins divested of 2.5 million shares of the Dallas-based company on March 22, impacting the equity portfolio by -3.06%. The stock traded for an average price of $53.30 per share on the day of the transaction.
The investor now holds 13.7 million shares of Tenet total, which account for 17.3% of the equity portfolio and is his largest holding as of the end of the fourth quarter. GuruFocus estimates he has gained 65.65% on the investment since establishing it in the first quarter of 2012.
The health care services provider, which operates a number of hospitals and outpatient centers across the U.S., has a $5.35 billion market cap; its shares were trading around $50.55 on Thursday with a price-earnings ratio of 13.57, a price-book ratio of 190.71 and a price-sales ratio of 0.31.
The GF Value Line indicates the stock is significantly overvalued currently based on historical ratios, past performance and future earnings projections.
The GuruFocus valuation rank of 7 out of 10, however, leans more toward undervaluation even though the share price and price-book ratio are approaching multiyear highs.
Tenet reported its fourth-quarter and full-year 2020 results on Feb. 9. It posted adjusted earnings of $4.72 per share on $4.9 billion in revenue for the three months ended Dec. 31.
For the full year, the company recorded earnings of $7.92 per share on $17.6 billion in revenue.
As the economy continues to recover from the Covid-19 pandemic, Tenet is anticipating adjusted earnings of between $3.52 and $4.81 per share for fiscal 2021.
The company also announced a plan to retire $478 million in debt using available cash on hand.
In a statement, Executive Chairman and CEO Ronald Rittenmeyer praised the company's employees for their adaptability over the past year "under such challenging and constantly evolving circumstances."
"Our resilience as an organization was tested, and we outperformed, delivered on our commitments and continued building a framework for our future growth and success," he said. "We followed our stated strategy ensuring the improvements were sustainable and the changes became part of our permanent fabric. We are very proud of every one of our colleagues across the Tenet enterprise for their selfless commitment to our patients, each other and our communities."
Tenet Healthcare is scheduled to report its first-quarter 2021 earnings on April 20.
GuruFocus rated Tenet's financial strength 3 out of 10 on the back of weak interest coverage and a low Piotroski F-Score of 0.97, which warns the company could be at risk of bankruptcy. The return on invested capital, however, eclipses the weighted average cost of capital, indicating good value creation.
The company's profitability fared slightly better with a 5 out of 10 rating, driven by an expanding operating margin, returns that outperform over half of its competitors and a moderate Piotroski F-Score of 6, which indicates business conditions are stable. Although Tenet has recorded a decline in revenue per share over the past five years, it still has a predictability rank of one out of five stars. GuruFocus data shows companies with this rank return an average of 1.1% annually over a 10-year period.
With a 12.92% stake, Robbins is Tenet's largest guru shareholder. Jim Simons (Trades, Portfolio)' Renaissance Technologies, Jeremy Grantham (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss and Lee Ainslie (Trades, Portfolio) also own the stock.
Portfolio composition
Over 70% of Robbins' $4.36 billion equity portfolio is invested in the health care space as of Dec. 31, with all other sectors having much smaller representations.
Other health care companies the guru was invested in as of the end of the fourth quarter included Bausch Health Companies Inc. (BHC, Financial), Takeda Pharmaceutical Co. Ltd. (TAK, Financial), Cigna Corp. (CI, Financial), HCA Healthcare Inc. (HCA, Financial) and McKesson Corp. (MCK, Financial).
Disclosure: No positions.
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