The Eaton Vance Worldwide Health Sciences Fund (Trades, Portfolio) disclosed it established six new positions when it released its third-quarter portfolio this week.
The Boston-based fund, which is managed by Jason Kritzer and Samantha Pandolfi, invests heavily in the health care space. The portfolio managers look around the world for securities that are not only reasonably priced, but which they believe will grow in value over time.
Based on these criteria, the fund invested in The Cooper Companies Inc. (COO, Financial), Santen Pharmaceutical Co. Ltd. (TSE:4536, Financial), Exact Sciences Corp. (EXAS, Financial), SanBio Co. Ltd. (TSE:4592, Financial), NMC Health PLC (LSE:NMC, Financial) and Idorsia Ltd. (XSWX:IDIA, Financial) during the quarter.
Cooper Companies
Having previously closed a position in Cooper Companies in the first quarter, Eaton Vance opened a new 38,090-share holding for an average price of $246.03. The trade had an impact of 0.92% on the equity portfolio.
The Pleasanton, California-based manufacturer of medical devices has a $13 billion market cap; its shares were trading around $264.51 on Friday with a price-earnings ratio of 104.13, a price-book ratio of 4.02 and a price-sales ratio of 5.36.
The Peter Lynch chart shows the stock is trading higher than its fair value, suggesting it is overpriced.
GuruFocus rated Cooper’s financial strength 6 out of 10. Although the company has issued approximately $986.7 million in new long-term debt over the last three years, it is at a manageable level due to sufficient interest coverage. The Altman Z-Score of 3.8 also indicates the company is financially stable.
The company’s profitability and growth scored and 8 out of 10 rating. While the operating margin is in decline, it still outperforms competitors. Cooper also has a moderate Piotroski F-Score of 6, suggesting operating conditions are stable, and a business predictability rank of four out of five stars. GuruFocus says that not only do companies with this rank have consistent earnings and revenue growth, but they see their stock prices gain an average of 9.8% per year.
Among the gurus invested in Cooper, Pioneer Investments (Trades, Portfolio) has the largest holding with 2.11% of outstanding shares. Paul Tudor Jones (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Ray Dalio (Trades, Portfolio)’s Bridgewater Associates, Ron Baron (Trades, Portfolio), David Carlson (Trades, Portfolio) and Ken Fisher (Trades, Portfolio) are also shareholders.
Santen Pharmaceutical
After selling out of Santen Pharmaceutical in the first quarter, the fund purchased 419,483 shares for an average price of 1,837.8 yen ($16.31) per share. The position was given 0.61% space in the equity portfolio.
The Japanese pharmaceutical company has a market cap of 681.74 billion yen; its shares closed at 1,672 yen on Thursday with a price-earnings ratio of 20.66, a price-book ratio of 2.37 and a price-sales ratio of 3.03.
According to the Peter Lynch chart, the stock is overpriced.
Santen Pharmaceutical’s financial strength was rated 9 out of 10 by GuruFocus as a result of good interest coverage and a high Altman Z-Score of 6.8. The company’s profitability and growth scored an 8 out of 10 rating. While the operating margin is in decline, it still outperforms 76% of industry peers. The company also has a high Piotroski F-Score of 7 and a 2.5-star business predictability rank, driven by good earnings and revenue growth. According to GuruFocus, companies with this rank typically see their stock prices gain an average of 7.3% per year.
The fund is the only guru invested in the company.
Exact Sciences
The Health Sciences Fund invested in 53,522 shares of Exact Sciences for an average price of $61.83 per share, dedicating 0.38% of the equity portfolio to the holding.
The health care diagnostics and research company, which is headquartered in Wisconsin, has a $9.07 billion market cap; its shares were trading around $73.82 on Friday with a price-book ratio of 12.60 and a price-sales ratio of 22.52.
Based on the median price-sales chart, the stock appears to be trading below its historical value.
Supported by a high Altman Z-Score of 6.65 and good cash-to-debt and debt-to-equity ratios, GuruFocus rated Exact Sciences’ financial strength 6 out of 10. The company’s profitability and growth scored a 5 out of 10 rating. Although the company has an expanding operating margin, it underperforms 66% of competitors. The company also has a moderate Piotroski F-Score of 5 and a one-star business predictability rank. According to GuruFocus, companies with this rank typically see their stock prices gain an average of 1.1% per year.
With 2.92% of outstanding shares, PRIMECAP Management (Trades, Portfolio) is the company’s largest guru shareholder. Jones, Pioneer, Jim Simons' (Trades, Portfolio) Renaissance Technologies, Joel Greenblatt (Trades, Portfolio), Fisher and John Hussman (Trades, Portfolio) also hold the stock.
SanBio
Eaton Vance picked up 92,232 shares of SanBio for an average price of 3,022.15 yen per share, giving it 0.32% space in the equity portfolio.
The Japanese biotech company, which focuses on developing regenerative cell drugs, has a market cap of 182.95 billion yen; its shares closed at 3,685 yen on Thursday with a price-book ratio of 16.92 and a price-sales ratio of 264.24.
The median price-sales chart shows the stock is trading above its historical average.
SanBio’s financial strength was rated 6 out of 10 by GuruFocus, boosted by a high Altman Z-Score of 25.29. The company’s profitability and growth scored a 3 out of 10 rating due to weak margins and returns and a moderate Piotroski F-Score of 4. The company has also recorded a decline in revenue per share over the last several years.
No other gurus have positions in the stock.
NMC Health
The fund bought 51,719 shares of NMC Health for an average price of 37.19 pounds ($48.33) per share, allocating 0.25% of the equity portfolio to the position.
Headquartered in Abu Dhabi, United Arab Emirates, the London-listed health care provider has a market cap of 7.35 billion pounds; its shares closed at 35.32 pounds on Thursday with a price-earnings ratio of 45.87, a price-book ratio of 8.34 and a price-sales ratio of 6.07.
According to the Peter Lynch chart, the stock is overpriced.
GuruFocus rated NMC Health’s financial strength 5 out of 10. Despite issuing approximately $698.4 million in new long-term debt over the last three years, the company’s Altman Z-Score of 4.31 indicates it is in good financial standing. The company’s profitability and growth scored a 7 out of 10 rating, boosted by an expanding operating margin, good returns and a moderate Piotroski F-Score of 4. GuruFocus also warned that the company has seen a slowdown in revenue per share growth over the last 12 months and its assets are building at a faster rate than its revenue is growing, suggesting it is becoming less efficient.
The Vanguard Health Care Fund (Trades, Portfolio) is also a shareholder.
Idorsia
The Worldwide Health Sciences Fund invested in 96,587 shares of Idorsia for an average price of 25.37 Swiss francs ($25.35) per share, dedicating 0.23% of the equity portfolio to the holding.
The Swiss biotech company, which focuses on developing treatments for the central nervous system, cardiovascular disorders, immunological disorders and orphan diseases, has a market cap of 2.6 billion francs; its shares closed at 19.85 francs on Thursday with a price-book ratio of 3.99 and a price-sales ratio of 13.82.
Year to date, the stock has fallen 22%.
Fueled by a Sloan ratio that suggests poor earnings quality, Idorsia’s financial strength was rated 5 out of 10 by GuruFocus. In addition to having weak cash-to-debt and debt-to-equity ratios, the Altman Z-Score of 2.84 suggests the company is under some financial pressure. The company’s profitability and growth fared even worse with a 2 out of 10 rating as a result of negative margins and returns. Regardless, the company’s operating and net margins are outperforming 52% of industry peers. In addition, its returns outperform competitors.
Vanguard also has a position in the stock, holding 0.62% of outstanding shares.
Other trades
During the quarter, Eaton Vance also added to its Novartis AG (NVS, Financial), Roche Holding AG (XSWX:ROG), GlaxoSmithKline PLC (LSE:GSK), Agilent Technologies Inc. (A), Merck & Co. Inc. (MRK) and Galapagos NV (GLPG) holdings.
The fund’s $1.06 billion equity portfolio is composed of 62 stocks. According to its fact sheet, the fund underperformed the MSCI World Health Care Index in 2017 with a return of 16.24%. The index posted a 19.80% return.
Disclosure: No positions.
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