Richard Pzena (Trades, Portfolio) gained 14 new holdings during the first quarter. Among them were three health care stocks, including Mylan NV(MYL, Financial), Cardinal Health Inc. (CAH, Financial) and Biogen Inc. (BIIB, Financial).
The Pzena Investment Management founder depends on a classic, deep value approach to find a company’s normalized earnings power and intrinsic value. The firm seeks to invest in good businesses at low prices whose current earnings are below historic norms. His portfolio consists of 156 stocks valued at $17.7 billion.
Pzena purchased nearly 7.3 million shares of Mylan for an average price of $40.31 per share, giving it 1.6% portfolio space.
Mylan is the world’s fourth-largest pharmaceutical manufacturer. In 2016, the company was affected by an investigation by the Department of Justice regarding its EpiPen pricing practices. The company later reached a $465 million settlement. In January, however, the Federal Trade Commission also launched an antitrust investigation into Mylan’s business practices.
With a market cap of $20 billion, the stock was trading around $37.38 on Tuesday with a price-earnings (P/E) ratio of 40.2, a price-book (P/B) ratio of 1.8 and a price-sales (P/S) ratio of 1.7.
The Peter Lynch chart below shows the stock is trading above its fair value.
GuruFocus ranked Mylan’s financial strength 4 of 10 and its profitability and growth 6 of 10. While the company does not currently pay a dividend, it has grown its revenue at a rate of 6.7% per year over the past three years.
The Vanguard Health Care Fund (Trades, Portfolio) is the company’s largest guru shareholder with 5.6% of its outstanding shares. In all, 12 gurus own the stock.
The investor bought nearly 1.06 million shares of Cardinal Health for an average price of $78.71 per share, expanding the portfolio by 0.5%.
Cardinal provides products and services to hospitals, pharmacies, surgery centers, clinical laboratories and doctor’s offices. In April, the company announced it is acquiring Medtronic’s (MDT, Financial) medical supplies business for $6.1 billion.
Headquartered in Ohio, the company has a market cap of $22.9 billion; its shares were trading around $72.01 on Tuesday with a P/E ratio of 17.2, a P/B ratio of 3.4 and a P/S ratio of 0.2.
Based on the Peter Lynch chart below, the stock is trading above its fair value.
GuruFocus ranked Cardinal Health’s financial strength 6 of 10 and its profitability and growth 5 of 10. The trailing dividend yield is 2.48%, and the forward dividend yield is 2.55%. Over the past five years, the company has grown its dividend at a rate of 15.5% per year.
Barrow, Hanley, Mewhinney & Strauss is Cardinal’s largest guru shareholder with 6.7% of its outstanding shares. In total, 15 gurus hold the stock.
After previously exiting his position in Biogen in fourth-quarter 2016, Pzena initiated a new 759-share position, paying an average price of $275.15 per share.
Biogen is a biopharmaceutical company that specializes in treatments for multiple sclerosis and other neurological and autoimmune diseases. While it is the current market leader in the MS space, it is facing competition from the development of new treatments by its competitors.
The Massachusetts-based company has a market cap of $57.5 billion; its shares were trading around $260.42 on Tuesday with a P/E ratio of 16.3, a P/B ratio of 4.8 and a P/S ratio of 4.9.
According to the Peter Lynch chart below, the stock is trading slightly above its fair value.
GuruFocus ranked Biogen’s financial strength 6 of 10 and its profitability and growth 9 of 10. While the company does not currently pay a dividend, it has grown its earnings per share by 29.4% per year over the past three years.
PRIMECAP Management (Trades, Portfolio) is Biogen’s largest shareholder among the gurus with 7.4% of its outstanding shares. In total, 29 gurus have positions in the company.
During the quarter, Pzena also increased his holdings of several other stocks, including McKesson Corp. (MCK, Financial), Owens & Minor Inc. (OMI, Financial), AbbVie Inc. (ABBV, Financial), CVS Health Corp. (CVS, Financial) and Medtronic. Health care stocks have a total weight of 8.5% in his portfolio.
Disclosure: I do not own any stocks mentioned in the article.
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