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Top 5 Trades of the Eaton Vance Worldwide Health Sciences Fund

Health care-focused fund releases 2nd-quarter portfolio

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Sydnee Gatewood
Jul 26, 2021

Summary

  • The fund entered four new positions.
  • Notable trades were made in existing positions.
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The

Eaton Vance Worldwide Health Sciences Fund (Trades, Portfolio) disclosed its portfolio for the second quarter of the year this week.

Managed by Jason Kritzer and Samantha Pandolfi, the fund, which is part of Boston-based Eaton Vance, invests heavily in the health care space. The portfolio managers look around the world for securities that are not only reasonably priced, but which they believe will grow in value over time.

Although the fund added four new holdings to the portfolio during the three months ended May 31, its most notable trades included additions to the Danaher Corp. (

DHR, Financial) and Agiliti Inc. (AGTI, Financial) positions, reductions in the Abbott Laboratories (ABT, Financial) and Humana Inc. (HUM, Financial) holdings and sale of Haemonetics Corp. (HAE, Financial).

Danaher

With an impact of 1.16% on the equity portfolio, Eaton Vance boosted its position in Danaher by 62.03%, buying 50,704 shares. It now holds a total of 132,451 shares. The stock traded for an average price of $238.64 per share during the quarter.

Representing 0.02% of the equity portfolio, GuruFocus estimates the fund has gained 54.11% on the investment since establishing it in the third quarter of 2017.

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The Washington, D.C.-based company, which manufactures professional, medical, dental and industrial products, has a $207 billion market cap; its shares were trading around $289.24 on Monday with a price-earnings ratio of 38.6, a price-book ratio of 5.26 and a price-sales ratio of 7.92.

The GF Value Line suggests the stock is modestly overvalued currently based on historical ratios, past performance and future earnings projections.

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GuruFocus rated Danaher’s financial strength 6 out of 10. Despite the company issuing approximately $9.7 billion in new long-term debt over the past three years, it is at a manageable level as a result of a comfortable level of interest coverage. The Altman Z-Score of 4.85 indicates the company is in good standing. The return on invested capital also exceeds the weighted average cost of capital, indicating value creation is occurring as the company grows.

The company’s profitability scored a 7 out of 10 rating. In addition to an expanding operating margin, Danaher is supported by strong returns on equity, assets and capital that outperform a majority of competitors as well as a high Piotrosk F-Score of 8, which indicates business conditions are healthy. The company also has a predictability rank of one out of five stars. According to GuruFocus, companies with this rank return an average of 1.1% annually over a 10-year period.

Of the many gurus invested in Danaher, the

Vanguard Health Care Fund (Trades, Portfolio) has the largest stake with 0.63% of outstanding shares. Other top guru shareholders are Pioneer Investments (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Daniel Loeb (Trades, Portfolio), Spiros Segalas (Trades, Portfolio) and Chuck Akre (Trades, Portfolio).

Agiliti

Impacting the equity portfolio by 0.94%, the Worldwide Health Sciences Fund upped its holding of Agiliti (

AGTI, Financial) by 193.11%, buying 478,221 shares. It now holds 725,867 shares total. During the quarter, shares traded for an average price of $12.69 each.

Accounting for 1.42% of the equity portfolio, GuruFocus says the fund has gained approximately 52.27% on the investment since the second quarter of 2019.

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The medical equipment management and services company, which is headquartered in Minneapolis, has a market cap of $2.44 billion; its shares were trading around $18.76 on Monday with a price-earnings ratio of 208.45, a price-book ratio of 4.01 and a price-sales ratio of 8.46.

According to the median price-sales chart, the stock appears to be overvalued currently.

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Agiliti’s financial strength was rated 3 out of 10 by GuruFocus on the back of weak interest coverage and a low Altman Z-Score of 1.35, which warns it could be at risk of going bankrupt. The WACC also eclipses the ROIC, indicating the company struggles with creating value.

The company’s profitability fared even worse, scoring a 2 out of 10 rating. While the operating margin is strong, its returns underperform over half of industry peers.

Eaton Vance is the only guru invested in Agiliti currently.

Abbott Laboratories

The fund trimmed its Abbott Laboratories (

ABT, Financial) position by 43.54%, selling 146,205 shares and impacting the equity portfolio by -1.67%. The stock traded for an average per-share price of $119.26 during the quarter.

It now holds 189,583 shares, which represent 1.98% of the equity portfolio. GuruFocus estimates the fund has gained 74.04% on the investment.

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The Chicago-based company, which manufactures medical devices, has a $211.94 billion market cap; its shares were trading around $119.18 on Monday with a price-earnings ratio of 33.61, a price-book ratio of 6.33 and a price-sales ratio of 5.32.

Based on the GF Value Line, the stock appears to be modestly overvalued.

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GuruFocus rated Abbott’s financial strength 6 out of 10, driven by adequate interest coverage and a high Altman Z-Score of 4.83. Assets are building up at a faster rate than revenue is growing, however, suggesting it is becoming less efficient. The ROIC surpasses the WACC, indicating good value creation is occurring.

The company’s profitability scored a 7 out of 10 rating on the back of an expanding operating margin, strong returns that outperform a majority of competitors and a moderate Piotroski F-Score of 6, suggesting business conditions are stable. Abbott also has a one-star predictability rank.

With a 0.45% stake, Vanguard is the company’s largest guru shareholder. Fisher,

PRIMECAP Management (Trades, Portfolio), Diamond Hill Capital (Trades, Portfolio), Pioneer, Jeremy Grantham (Trades, Portfolio), Mairs and Power (Trades, Portfolio), Ray Dalio (Trades, Portfolio) and the MS Global Franchise Fund, among others, also own the stock.

Humana

With an impact of -0.89% on the equity portfolio, Eaton Vance sold 24,685 shares of Humana (

HUM, Financial), curbing the position by 62.58%. During the quarter, the stock traded for an average price of $429.83 per share.

It now holds 14,760 shares, accounting for 0.58% of the equity portfolio. According to GuruFocus, the fund has gained an estimated 28.36% on the investment.

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Headquartered in Louisville, Kentucky, the healthy insurance company has a market cap of $60.29 billion; its shares were trading around $467.31 on Monday with a price-earnings ratio of 16.63, a price-book ratio of 4.24 and a price-sales ratio of 0.78.

The GF Value Line suggests the stock is fairly valued.

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Humana’s financial strength was rated 5 out of 10. Despite issuing approximately $2.3 billion in new long-term debt over the past three years, it is at a manageable level since the company has sufficient interest coverage. The ROIC is also above the WACC, indicating value is being created.

The company’s profitability scored an 8 out of 10 rating, driven by strong returns that outperform a majority of industry peers. Humana also has a high Piotroski F-Score of 8 and, as a result of consistent earnings and revenue growth, a four-star predictability rank. GuruFocus says companies with this rank return an average of 9.8% annually.

Vanguard is the company’s largest guru shareholder with a 1.34% stake. Diamond Hill, Pioneer and

Bill Nygren (Trades, Portfolio) also have notable positions in the stock.

Haemonetics

Impacting the equity portfolio by -1.11%, Eaton Vance dumped its 92,247 remaining shares of Haemonetics (

HAE, Financial). Shares traded for an average price of $89.23 each during the quarter.

GuruFocus data shows the fund lost an estimated 5.63% on the investment, which was established in the second quarter of 2019.

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The Boston-based company, which provides blood and plasma supplies and services, has a $3 billion market cap; its shares were trading around $58.89 on Monday with a price-earnings ratio of 37.98, a price-book ratio of 4.1 and a price-sales ratio of 3.47.

According to the GF Value Line, the stock is significantly undervalued.

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Haemonetics’ financial strength was rated 4 out of 10 by GuruFocus. As a result of the company issuing approximately $545.9 million in new long-term debt over the past three years, it has weak interest coverage. The Altman Z-Score of 2.71 also indicates it is under some pressure since the company has recorded losses in operating income over the past several years. The ROIC is above the WACC, indicating value is being created.

The company’s profitability scored a 6 out of 10 rating, boosted by an expanding operating margin, strong returns that outperform over half of its competitors and a moderate Piotroski F-Score of 5. The one-star predictability rank is on watch as a result of revenue per share declining over the past year.

Gurus that still have positions in Haemonetics are

Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Chuck Royce (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Fisher, Pioneer and George Soros (Trades, Portfolio).

Additional trades and portfolio performance

New holdings the Worldwide Health Sciences Fund established during the quarter were in 10x Genomics Inc. (

TXG, Financial), Inovalon Holdings Inc. (INOV, Financial), PolyPeptide Group AG (XSWX:PPGN, Financial) and Travere Therapeutics Inc. (TVTX, Financial).

Eaton Vance’s $1.11 billion equity portfolio, which is composed of 58 stocks, is largely invested in the drug manufacturing industry with a weight of 36.41%.

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The fund returned 21.74% in fiscal 2020.

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Disclosures

I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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