Daniel Loeb's Third Point disclosed an equity portfolio valued at some $10.68 billion at the end of the second quarter. Among the 10 largest holdings from Loeb’s equity portfolio (which comprises 56.81% of the total portfolio value), the three top positions are: Amgen Inc. (AMGN, Financial), Dow Chemical Company (DOW, Financial) and Allergan PLC (AGN, Financial).
Amgen is a $110.26 billion market cap company that has major treatments for anemia, neutropenia, rheumatoid and psoriatic arthritis, psoriasis, cancer and osteoporosis.
Despite having reduced its weight by 10%, Third Point still holds 12.94% of its portfolio in Amgen, with 9.0 million shares. The value of the stake amounts to $1.38 billion, but in that period, the stock lost 2.2%.
In GuruFocus, the holding history since Loeb started his position in the second quarter of 2014 can be seen.
| Period | Bought/Sold | % Change | Qtr. End Shares | Avrg. Price |
| (Shares) | ||||
| 2014Q2 | New holding | New holding | 450,000 | $115.76 |
| 2014Q3 | 875,000 | Add 194.44% | 1,325,000 | $130.54 |
| 2014Q4 | 9,350,000 | Add 705.66% | 10,675,000 | $155.82 |
| 2015Q1 | -675,000 | Reduce 6.32% | 10,000,000 | $157.49 |
| 2015Q2 | -1,000,000 | Reduce 10.00% | 9,000,000 | $160.19 |
| Shares Bought: | 10,675,000 | Average Price: $152.06/share | ||
| Shares Sold: | -1,675,000 | Average Price: $159.1/share | ||
| Current Price: $145.72 | Total Estimated Gain since 2014Q2: -3% | ||||
The stock performed well until the end of 2014. Following the guru in this period would have generated almost 5% in price appreciation. But in 2015, the story changes. Looking at the graph, we can see great price volatility and a downward trend. The last trading price indicates that the stock lost 8.4% on a year-to-date basis. It does not seem a coincidence that Loeb has decreased his position in the stock.
On the other hand, Jim Simons (Trades, Portfolio) increased his stake by 17% in the quarter to 1.77 million shares valued at $271.77 billion. It seems that Simons is looking for long-term attractiveness.
Amgen has focused on treating a neurological disease that affects up to 15% of the world's population, the migraine. The firm has invested heavily in manufacturing techniques while developing a cost-cutting program to reach better margins. Despite this, the gross margin has been in long-term decline with an average rate of decline per year of 1.7%. Further, the operating margin has been in a five-year decline, with an average rate of decline per year of 3.7%. As if this were not enough, revenue growth has slowed down over the past 12 months. The company must keep making efforts to restructure its operations and improve margins.
Amgen has a strong balance sheet and good cash generation. It recently added another $2 billion to its stock buyback program. Another sign is showing the performance of its cash flow generation. Earlier this year it increased its dividend payout by 30%.
Final comment
Amgen is a good long-term choice given its strong balance sheet and 2% dividend yield. I expect the company will continue to reward shareholders with both stock buybacks and dividends. Following the good results (a few months ago the company highlighted the results from the Phase 2 study of its migraine prevention drug), Amgen should be an option for the future, especially considering that P/E and P/B are both close to a one-year low.
Disclosure: Omar Venerio holds no position in any stocks mentioned
