Express Scripts (NASDAQ:ESRX) was a top contributor during the quarter. The stock recovered some of the poor performance from the first quarter after Anthem management noted that, despite filing a lawsuit over Express Scripts’s pricing, they believed any ruling on the lawsuit would take several years and were still open to negotiations. Express Scripts is the sole, independent pharmacy benefits manager (PBM), which we think is key for maintaining their alignment with customers. We continue to expect Express Scripts to drive mid-to-high single-digit EBITDA growth using its scale to negotiate better pricing with drug manufacturers and service providers, while increasing patient adherence. We think earnings per share can continue to grow at a double-digit rate as shares are repurchased at what, in our view, are attractive valuations. That said, as shares rallied from their previous lows, we reduced the stock's weighting to better reflect the risk/reward of Express Scripts’s growth and valuation.
From David Rolfe (Trades, Portfolio)'s second quarter 2016 Wedgewood Partners Client Letter.
