Get Premium to unlock powerful stock data

The Vanguard Health Care Fund's Top 5 Trades of the 3rd Quarter

Fund pulls back Pfizer holding, doubles down on Biogen

Author's Avatar
Nov 03, 2021
Summary
  • The fund’s biggest trades for the quarter included reductions to its holdings in Pfizer, Alnylam Pharmaceuticals and Abbott Laboratories.
  • It also made a significant addition to its Biogen investment.
  • The biggest new buy of the quarter was Diasorin.
Article's Main Image

The

Vanguard Health Care Fund (Trades, Portfolio) recently released its portfolio updates for the third quarter of 2021, which ended on Sept. 30.

Founded in 1984, the fund has been investing globally in health care-related stocks with the aim of long-term capital appreciation for over 30 years. Portfolio manager Jean Hynes, who has been advising the fund since 2008, chooses stocks based primarily on balance sheet strength, good management teams and product pipelines that show high potential for consistent profitability and growth.

Based on its investing criteria, the fund’s biggest trades for the quarter included reductions to its holdings in Pfizer Inc. (

PFE, Financial), Alnylam Pharmaceuticals Inc. (ALNY, Financial) and Abbott Laboratories (ABT, Financial). It also made a significant addition to its Biogen Inc. (BIIB, Financial) investment, and its biggest new buy of the quarter was Diasorin SpA (MIL:DIA, Financial).

Pfizer

The fund trimmed its Pfizer (

PFE, Financial) holding by 8,942,502 shares, or 12.73%, leaving a remaining investment of 61,301,916 shares. The trade had a -0.69% impact on the equity portfolio, and Pfizer remains the fund’s third-largest holding. During the quarter, shares traded for an average price of $44.27.

1455967975327891456.png

Pfizer is a multinational biopharmaceutical company headquartered in New York. Its main areas of research are internal medicine, inflammation and immunology, oncology, rare diseases, vaccines and anti-infectives. Its most recent success has been its Covid-19 vaccine that was developed in partnership with BioNTech (

BNTX, Financial).

On Nov. 3, shares of Pfizer traded around $44.87 for a market cap of $250.93 billion. According to the GuruFocus Value chart, the stock is modestly undervalued.

1455976634514636800.png

The company has a financial strength rating of 5 out of 10 and a profitability rating of 6 out of 10. The Piotroski F-Score of 5 out of 9 and Altman Z-Score of 2.98 show the financial situation is stable. The return on invested capital is typically higher than the weighted average cost of capital, meaning the company is creating value for shareholders.

1455976988706832384.png

Alnylam Pharmaceuticals

The fund cut its stake in Alnylam Pharmaceuticals Inc. (

ALNY, Financial) by 1,359,106 shares, or 17.72%, for a remaining holding of 6,310,027 shares. The trade had a -0.45% impact on the equity portfolio. Shares traded for an average price of $187.49 during the quarter.

1455968689957601280.png

Based in Cambridge, Massachusetts, Alnylam is a biopharmaceutical company that focuses its research on the discovery, development and commercialization of RNA interference therapeutics for genetic, cardio-metabolic, infections and CNS/ocular diseases.

On Nov. 3, shares of Alnylam traded around $172.49 for a market cap of $20.52 billion. According to the GF Value chart, the stock is a possible value trap.

1455978281638789120.png

The company has a financial strength rating of 4 out of 10 and a profitability rating of 2 out of 10. The Piotroski F-Score of 5 out of 9 and Altman Z-Score of 2.6 show a stable financial situation. The company has a three-year revenue per share growth rate of 62.8%, but the three-year Ebitda per share growth rate is -5.9%.

1455978897933041664.png

Abbott Laboratories

The fund sold 1,925,959 shares, or 26.42%, of its investment in Abbott Laboratories (

ABT, Financial), leaving a remaining stake of 5,364,638 shares. The trade had a -0.44% impact on the equity portfolio. During the quarter, shares traded for an average price of $122.86.

1455969169689509888.png

Headquartered in Chicago, Abbot Laboratories is a global medical devices and health care company specializing in diagnostics, diabetes, cardiovascular and neuromodulation products. It is also well-known for its nutrition brands, which include Pedialyte, Ensure, Glucerna and Similac.

On Nov. 3, shares of Abbott traded around $128.17 for a market cap of $227.47 billion. According to the GF Value chart, the stock is modestly overvalued.

1455979127936090112.png

The company has a financial strength rating of 6 out of 10 and a profitability rating of 7 out of 10. The cash-debt ratio of 0.48 is low, but the Piotroski F-Score implies a very healthy financial situation. The ROIC is typically higher than the WACC, indicating the company is creating value for shareholders most years.

1455979403543805952.png

Biogen

The stock that the fund was buying the most during the quarter was Biogen (

BIIB, Financial); it acquired an additional 516,825 shares, increasing the holding by 11.62% for a total of 4,964,327 shares. The trade had a 0.30% impact on the equity portfolio. Shares traded for an average price of $328.16 during the quarter.

1455969621311193088.png

Biogen is a biotech company based in Cambridge, Massachusetts that primarily researches and develops therapies for neurological and neurodegenerative diseases, including multiple sclerosis, leukemia and Alzheimer’s.

On Nov. 3, shares of Biogen traded around $278.37 for a market cap of $40.75 billion. According to the GF Value chart, the stock is fairly valued.

1455979661149569024.png

The company has a financial strength rating of 5 out of 10 and a profitability rating of 9 out of 10. The interest coverage ratio of 7.13 and Altman Z-Score of 3.54 show the company should have no problems paying its debt. The three-year revenue per share growth rate is 13.1%, while the three-year Ebitda per share growth rate is 5.4%.

1455980507027439616.png

Diasorin SpA

The fund’s top new buy of the quarter was Diasorin SpA (

MIL:DIA, Financial). It purchased 270,468 shares of the stock, giving it a 0.12% weight in the equity portfolio. During the quarter, shares traded for an average price of 181.66 euros ($210.62).

1455970180663574528.png

Diosorin is an Italian biotechnology company that produces and sells in vitro diagnostics reagent kits that are used in immunodiagnostics and molecular diagnostics. It recently acquired Luminex, which gives it access to Luminex’s multiplexing technology, treatment portfolio and life sciences business.

On Nov. 3, shares of Diosorin traded around 197.65 euros for a market cap of 10.82 billion euros. According to the GF Value chart, the stock is fairly valued.

1455982210065858560.png

The company has a financial strength rating of 8 out of 10 and a profitability rating of 8 out of 10. The interest coverage ratio of 60.63 and current ratio of 4.46 show the company has a fortress-like balance sheet. The operating margin of 40.13% and net margin of 28.87% are outperforming 91% of industry peers.

1455984069216272384.png

Portfolio overview

As of the quarter’s end, the fund held shares of 110 common stocks value at a total of $49.09 billion. The turnover for the quarter was 2%.

The top holdings are UnitedHealth Group Inc. (

UNH, Financial) with 5.71% of the equity portfolio, AstraZeneca PLC (LSE:AZN, Financial) with 5.64% and Pfizer with 5.37%. In terms of portfolio weighting, the fund is entirely invested in the health care industry.

Also check out:

Disclosures

I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
The mention of stocks in this article does not at any point constitute an investment recommendation. Portfolio updates reflect only common stock positions as per the SEC filings for the quarter in question and may not include non-U.S.-listed international stocks or changes made after the quarter ended.
The views of this author are solely their own opinion and are not endorsed or guaranteed by GuruFocus.com
Rating:
5 / 5 (1 votes)
Author's Avatar
WRITTEN BY

GuruFocus Screeners

Related Articles

Q&A with Gurus