On Friday, the New York-based pharmaceutical company announced that clinical trials of its experimental Covid-19 pill, in combination with a low dose of an HIV drug called ritonavir, have been successful in preventing people from becoming hospitalized or dying from the virus.
In an interview with CNBC’S “Squawk Box” on Friday, Pfizer CEO Albert Bourla emphasized that while the antiviral pill shows promise, vaccines and booster shots are still important in fighting the pandemic.
“The fact that we have a treatment is not at all a reason not to take the vaccine,” he said. “In fact, we should take the vaccine.”
As a result of these developments, value opportunities may be found among health care companies that outperformed the Standard & Poor’s 500 Index. As of Nov. 5, the GuruFocus All-in-One Screener, a Premium feature, found several stocks that with a market cap over $5 billion that had a higher return relative to the index for the period. It also looked for stocks with price-earnings ratios between 1 and 14 and predictability ranks of at least one out of five stars.
Based on these criteria, health care stocks that outperformed the S&P 500 by at least 15% year to date are HCA Healthcare Inc. (HCA, Financial) and Tenet Healthcare Corp. (THC, Financial). The S&P 500 Index has gained around 26.07% over the same period.
Having climbed nearly 53% year to date, HCA Healthcare (HCA, Financial) has a $78.45 billion market cap; its shares were trading around $250.67 on Friday with a price-earnings ratio of 12.85 and a price-sales ratio of 1.46.
The GF Value Line suggests the stock is significantly overvalued currently based on its historical ratios, past performance and future earnings projections.
The Nashville, Tennessee-based company owns and operates health care facilities across the U.S., including 185 hospitals, 121 freestanding outpatient surgery centers and a broad network of physician offices, urgent care clinics and freestanding emergency rooms.
GuruFocus rated HCA’s financial strength 3 out of 10. Despite having adequate interest coverage, the Altman Z-Score of 2.94 indicates the company is under some pressure. The return on invested capital also eclipses the weighted average cost of capital, meaning value is being created as the company grows.
The company’s profitability fared better with an 8 out of 10 rating. Although the operating margin is in decline, it and the returns on equity, assets and capital outperform a majority of competitors. HCA Healthcare also has a moderate Piotroski F-Score of 5 out of 9, implying that business conditions are typical for a stable company. Due to consistent earnings and revenue growth, the company also has a 4.5-star predictability rank. According to GuruFocus, companies with this rank return an average of 10.6% annually over a 10-year period.
Of the gurus invested in HCA Healthcare, the Vanguard Health Care Fund (Trades, Portfolio) has the largest stake with 1.07% of its outstanding shares. First Eagle Investment (Trades, Portfolio), Bill Nygren (Trades, Portfolio), Hotchkis & Wiley, Glenn Greenberg (Trades, Portfolio), Pioneer Investments, Larry Robbins (Trades, Portfolio), David Tepper (Trades, Portfolio), Charles Brandes (Trades, Portfolio), Ray Dalio (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), First Pacific Advisors (Trades, Portfolio) and Lee Ainslie (Trades, Portfolio) also have positions in the stock.
With a gain of 90.96% year to date, Tenet Healthcare (THC, Financial) has a market cap of $8.13 billion; its shares were trading around $76.25 on Fridaywith a price-earnings ratio of 7.6, a price-book ratio of 11.25 and a price-sales ratio of 0.43.
According to the GF Value Line, the stock is significantly overvalued currently.
The health care services company, which is headquartered in Dallas, operates a collection of hospitals, outpatient facilities and physician practices across the U.S.
Tenet’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 1.32, which warns the company could be at risk of bankruptcy. The WACC also slightly overshadows the ROIC, indicating it struggles to create value.
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 industry peers and a moderate Piotroski F-Score of 5. 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.
With a 9.94% stake, Robbins is the company’s largest guru shareholder. Other gurus invested in Tenet are Andreas Halvorsen (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Greenblatt, Alinslie, Dalio and Jeremy Grantham (Trades, Portfolio).
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