Vanguard Health Care Fund Buys 2 New Stakes in Second Quarter

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Aug 06, 2015
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As its name suggests, Vanguard Health Care Fund (Trades, Portfolio) invests almost exclusively in health care companies. It’s been a successful investment niche. Vanguard enjoyed returns exceeding 28% in 2014, 43% in 2013 and 15% in 2012.

Vanguard bought added two new stakes to its portfolio in the second quarter – Baxter International Inc. (BAX, Financial) and Seattle Genetics Inc. (SGEN, Financial).

Vanguard purchased 1,945,220 shares of Baxter International, an Illinois-based medical equipment company, for an average price of $37.39 per share. The transaction had a 0.15% impact on Vanguard’s portfolio.

Baxter International has a market cap of $22.86 billion and an enterprise value of $30.2 billion. It has a P/E of 9.7, a Price/Book of 3.2 and a Price/Sales of 1.4. Daniel Loeb (Trades, Portfolio), Richard Pzena (Trades, Portfolio), Tweedy Browne (Trades, Portfolio), Bill Frels (Trades, Portfolio), Jim Simons (Trades, Portfolio), Diamond Hill Capital (Trades, Portfolio), Tweedy Browne (Trades, Portfolio) Global Value, Jeremy Grantham (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Charles Brandes (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Manning & Napier Advisors, Scott Black (Trades, Portfolio), John Buckingham (Trades, Portfolio), John Rogers (Trades, Portfolio), John Keeley (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Signature Select Canadian Fund (Trades, Portfolio), Murray Stahl (Trades, Portfolio), Meridian Funds (Trades, Portfolio), David Dreman (Trades, Portfolio), Jeff Auxier (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Dodge & Cox, John Hussman (Trades, Portfolio) and First Eagle Investment (Trades, Portfolio) have shares of Baxter International in their portfolios.

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Vanguard acquired a 170,125-share stake in Seattle Genetics, a biotechnology and pharmaceutical company based in Washington state, for an average price of $41.27 per share. The deal had a 0.02% impact on Vanguard’s portfolio.

Seattle Genetics has a market cap of $5.67 billion and an enterprise value of $5.44 billion. It has a Price/Book of 31.8 and a Price/Sales of 18.2. PRIMECAP Management (Trades, Portfolio), Columbia Wanger (Trades, Portfolio) and Manning & Napier Advisors have shares of Seattle Genetics in their portfolios.

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Although Seattle Genetics reported record sales for Adcetris, its only drug, it lost nearly $48 million in the second quarter, mainly because of the company’s research and development costs.

Vanguard added to 23 existing stakes in the second quarter. The most significant addition was to Vanguard’s stake in Biogen Inc. (BIIB, Financial), a biotechnology company based in Cambridge, Massachusetts.

Vanguard more than quintupled its Biogen stake, purchasing 1,441,230 shares for an average price of $401.33 per share. The deal had a 1.17% impact on Vanguard’s portfolio.

Biogen has a market cap of $74.86 billion and an enterprise value of $72.49 billion. It has a P/E of 29.1, a Price/Book of 5.9 and a Price/Sales of 7.3. PRIMECAP Management (Trades, Portfolio), Frank Sands (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Stanley Druckenmiller (Trades, Portfolio), Ken Fisher (Trades, Portfolio), John Burbank (Trades, Portfolio), Jim Simons (Trades, Portfolio), RS Investment Management (Trades, Portfolio), Ray Dalio (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Ron Baron (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Murray Stahl (Trades, Portfolio), Signature Select Canadian Fund (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Richard Snow (Trades, Portfolio) and Bill Frels (Trades, Portfolio) have shares of Biogen in their portfolios.

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Vanguard also increased its stake in Merck & Co. Inc. (MRK, Financial), a New Jersey-based pharmaceutical company, by about 14%. Vanguard bought 5,651,550 shares for an average price of $58.78 per share. The transaction had a 0.65% impact on Vanguard’s portfolio.

Merck, the third-most valuable stake in Vanguard’s portfolio, has a market cap of $165.11 billion and an enterprise value of $179.47 billion. It has a P/E of 15.1, a Price/Book of 3.4 and a Price/Sales of 4.1. Dodge & Cox, James Barrow (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Brian Rogers (Trades, Portfolio), Manning & Napier Advisors, Pioneer Investments (Trades, Portfolio), Charles Brandes (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Jim Simons (Trades, Portfolio), Kahn Brothers (Trades, Portfolio), RS Investment Management (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Robert Bruce (Trades, Portfolio), Signature Select Canadian Fund (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Bill Frels (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Steven Cohen (Trades, Portfolio), NWQ Managers (Trades, Portfolio), Murray Stahl (Trades, Portfolio), Jeff Auxier (Trades, Portfolio), Mark Hillman (Trades, Portfolio), Prem Watsa (Trades, Portfolio), First Eagle Investment (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Richard Snow (Trades, Portfolio), Ruane Cunniff (Trades, Portfolio) and Tom Russo (Trades, Portfolio) have shares of Merck in their portfolios.

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Merck reported a second-quarter net profit increase of 13%.

Divestitures and reductions

Vanguard sold two of its stakes in the second quarter – Teva Pharmaceutical Industries Ltd. (TEVA) and NuVasive Inc. (NUVA, Financial).

Vanguard sold its 1,896,960-share stake in Teva Pharmaceutical, an Israel-based international pharmaceutical company, for an average price of $61.69 per share. The transaction had a -0.25% impact on Vanguard’s portfolio.

Teva Pharmaceutical has a market cap of $59.12 billion and an enterprise value of $70.62 billion. It has a P/E of 23.7, a Price/Book of 2.6 and a Price/Sales of 3.0. James Barrow (Trades, Portfolio), First Eagle Investment (Trades, Portfolio), NWQ Managers (Trades, Portfolio), Richard Snow (Trades, Portfolio), Jim Simons (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Stanley Druckenmiller (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Michael Price (Trades, Portfolio), Manning & Napier Advisors, Andreas Halvorsen (Trades, Portfolio), Diamond Hill Capital (Trades, Portfolio), Ronald Muhlenkamp (Trades, Portfolio), David Dreman (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Bernard Horn (Trades, Portfolio), John Keeley (Trades, Portfolio) and Charles Brandes (Trades, Portfolio) have shares of Teva Pharmaceutical in their portfolios.

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Vanguard divested itself of its 1,628,303-share stake in NuVasive, a San Diego-based medical device company, for an average price of $46.75 per share. The sale had a -0.16% impact on Vanguard’s portfolio.

NuVasive has a market cap of $2.66 billion and an enterprise value of $2.76 billion. It has a P/E of 74.6, a Price/Book of 4.0 and a Price/Sales of 3.4. Ken Fisher (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Jim Simons (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) have shares of NuVasive in their portfolios.

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Vanguard reduced its positions in 14 companies in the second quarter. The most significant was its sale of more than 95% of its stake in Express Scripts Holding Co. (ESRX, Financial), a St. Louis-based pharmaceutical company. Vanguard sold 3,054,600 shares for an average price of $87.36. The sale had a -0.56% impact on Vanguard’s portfolio.

Express Scripts has a market cap of $60.17 billion and an enterprise value of $76.01 billion. It has a P/E of 41.0, a Price/Book of 3.8 and a Price/Sales of 0.6. Dodge & Cox, Jeremy Grantham (Trades, Portfolio), Chris Davis (Trades, Portfolio), David Rolfe (Trades, Portfolio), Manning & Napier Advisors, First Pacific Advisors (Trades, Portfolio), Steven Romick (Trades, Portfolio), Glenn Greenberg (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Charles Brandes (Trades, Portfolio), HOTCHKIS & WILEY, Diamond Hill Capital (Trades, Portfolio), Wallace Weitz (Trades, Portfolio), Jim Simons (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Scott Black (Trades, Portfolio), Ray Dalio (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), John Keeley (Trades, Portfolio), Jeff Auxier (Trades, Portfolio), Ruane Cunniff (Trades, Portfolio) and First Eagle Investment (Trades, Portfolio) have shares of Express Scripts in their portfolios.

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