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James Li
James Li
Articles (325)  | Author's Website |

The Big 3: Larry Robbins' Top 2nd-Quarter Buys

Guru reports quarterly portfolio

August 16, 2016 | About:

Larry Robbins (Trades, Portfolio), founder of Glenview Capital Management, seeks capital appreciation through deep fundamental research on stocks with high growth potential. During the second quarter, Robbins made big purchases in three separate company stocks: IMS Health Holdings Inc. (NYSE:IMS), Williams Holdings Inc. (NYSE:WMB) and Quintiles Transnational Holdings Inc. (Q).

Robbins purchased 6,759,068 shares of IMS Health at an average price of $25.64 per share. This investment increased his portfolio by 1.21%. Previously, the CEO of Glenview Capital sold his 2.5 million-share position during the third quarter of 2015 when IMS Health averaged $30.70 per share.

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With a financial strength rank of just 4, the health information technology company has a modest business operation. IMS Health has interest coverage of just 2.03, which underperforms Ben Graham’s benchmark of 5 and 93% of global health information services companies. Additionally, the company’s Altman Z-score is in distressed zones, implying potential bankruptcy in the short term.

While the company’s operating margin outperforms 74% of global health information services companies, IMS Health only has a profitability rank of 5. The company’s net margin and return on equity outperform just 56% and 59% of all companies in its industry, and its three-year EBITDA growth is -2.10%.

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The Glenview Capital CEO also purchased 7,132,682 shares of Williams and 1,919,555 shares of Quintiles. The companies averaged $20.08 and $67.01 per share. With these two transactions, Robbins increased his portfolio by 1.98% in the aggregate.

Founded in 1908, Williams Companies connects North America’s hydrocarbon resources to other growing markets. Currently, the company has poor financial strength: With a financial strength rating of just 3, Williams likely has an unstable business operation.

Additionally, the company’s Altman Z-score is 0.03, implying severe distress. During the past 10 years, the company seldom had Z-scores above distress zones.

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Several gurus, including Robbins, invested in Williams despite the company’s poor financial outlook. Jim Simons (Trades, Portfolio) invested in 2.235 million shares in Williams while Steven Cohen (Trades, Portfolio) increased his position nearly eightfold, adding about 2.86 million shares.

Unlike Williams, which has a weakened financial outlook, Quintiles has a strong profitability rank and a higher financial strength rank. The medical diagnostics and research company has a Piotroski F-score of 7 and an Altman Z-score of 3.45, suggesting a strong and stable business operation. Additionally, Quintiles has a higher return on assets than 86% of global diagnostics and research companies, and its return on investment capital significantly outperforms its WACC.

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Quintiles is slightly undervalued based on a price-earnings (P/E) ratio of 23.

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As the company’s financials strengthen, several gurus have increased their positions in Quintiles. Robbins has the second-most number of shares in the medical research company. The Vanguard Health Care Fund (Trades, Portfolio), which specializes in health care companies, owns 2,929,638 shares of Quintiles after increasing its position by 51.61%.

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Conclusions and see also

As implied by his top 10 holdings, Robbins prefers health care companies. Two health care providers companies, Humana Inc. (NYSE:HUM) and HCA Holdings Inc. (NYSE:HCA), represent about 19% of the CEO’s portfolio. As of June 30, Robbins had 56.3% of his capital in the health care sector.

Samuel Isaly, manager of the Eaton Vance Worldwide Health Care Fund, made six trades in the health care industry, as discussed in a previous article.

With over 120 different filters, the All-in-One Guru Screener allows you to find good health care stocks in which to invest based on user-selected criteria.

Disclosure: The author has no position in the stocks mentioned in this article.

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About the author:

James Li
I am an editorial assistant and researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

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