The Eaton Vance Worldwide Health Sciences Fund (Trades, Portfolio), part of Boston-based investment firm Eaton Vance, disclosed it established five new positions when it released its fourth-quarter portfolio on Tuesday.
Managed by Jason Kritzer and Samantha Pandolfi, the fund 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 portfolio managers invested in Sanofi SA (XPAR:SAN, Financial), Dechra Pharmaceuticals PLC (LSE:DPH, Financial), Elanco Animal Health Inc. (ELAN, Financial), WellCare Health Plans Inc. (WCG, Financial) and Federal Street Acquisition Corp. (FSAC, Financial).
Sanofi
The fund invested in 312,354 shares of Sanofi for an average price of 76.61 euros ($87.44) per share, allocating 2.7% of the equity portfolio to the holding.
The French drugmaker has a market cap of 92.55 billion euros; its shares closed at 74.61 euros on Tuesday with a price-earnings ratio of 27.03, a price-book ratio of 1.61 and a price-sales ratio of 2.61.
The Peter Lynch chart shows the stock is trading higher than its fair value, suggesting it is overpriced.
GuruFocus rated Sanofi’s financial strength 6 out of 10. Although the company has issued approximately 1.3 billion euros in new long-term debt over the last three years, it is at a manageable level due to adequate interest coverage. Regardless, the Altman Z-Score of 2 indicates the company is under some financial pressure.
The drugmaker’s profitability and growth scored a 7 out of 10 rating, driven by good margins and returns that outperform competitors and a moderate Piotroski F-Score of 6, which implies business conditions are stable. Sanofi also has a business predictability rank of one out of five stars, which is on watch as a result of a slowdown in revenue per share growth over the last 12 months. According to GuruFocus, companies with this rank typically see their stocks gain an average of 1.1% per year.
With its purchase of 0.03% of outstanding shares, Eaton Vance is not Sanofi’s largest guru shareholder. The Signature Select Canadian Fund (Trades, Portfolio) also has a position in the stock.
Dechra Pharmaceuticals
Eaton Vance picked up 141,046 shares of Dechra Pharmaceuticals for an average price of 22.44 pounds ($29.33) per share, dedicating 0.37% of the equity portfolio to the position.
The British manufacturer of veterinary products has a market cap of 2.37 billion pounds; its shares closed at 23.14 pounds on Tuesday with a price-earnings ratio of 62.54, a price-book ratio of 4.69 and a price-sales ratio of 5.54.
According to the Peter Lynch chart, the stock is overvalued.
Dechra’s financial strength was rated 6 out of 10 by GuruFocus. Despite issuing new long-term debt over the last three years, the company has good interest coverage. In addition, the Altman Z-Score of 3.65 indicates the company is in good fiscal standing.
The company’s profitability and growth scored a 7 out of 10 rating. Although the operating margin is in decline, it still outperforms 66% of industry peers. Dechra is also strengthened by good returns, a moderate Piotroski F-Score of 5 and a one-star business predictability rank.
The fund holds 0.14% of the company’s outstanding shares.
Elanco Animal Health
The portfolio managers purchased 80,975 shares of Elanco Animal Health for an average price of $33.36 per share, giving it 0.26% space in the equity portfolio.
The Indiana-based manufacturer of health care products for livestock and pets, which went public last September, has an $11.15 billion market cap; its shares were trading around $30.49 on Wednesday with a price-earnings ratio of 3,049, a price-book ratio of 2.15 and a price-sales ratio of 4.67.
The price chart shows the stock has fallen approximately 15% since its initial public offering.
GuruFocus rated Elanco’s financial strength 4 out of 10. In addition to having a low cash-debt ratio of 0.12, the Altman Z-Score of 2.20 suggests the company is under some fiscal stress.
The company’s profitability and growth scored a 3 out of 10 rating despite being supported by strong margins and returns that outperform competitors.
Of the gurus invested in Elanco, PRIMECAP Management (Trades, Portfolio) has the largest stake with 1.03% of outstanding shares. Dodge & Cox, the Vanguard Health Care Fund (Trades, Portfolio), Andreas Halvorsen (Trades, Portfolio), George Soros (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Coatue Management LLC, Signature Select, Ron Baron (Trades, Portfolio) and Pioneer Investments (Trades, Portfolio) are also shareholders.
WellCare Health Plans
Having previously closed a position in WellCare Health Plans in the first quarter of 2017, the fund opened a new 10,202-share holding for an average price of $288.77 per share. The trade had an impact of 0.25% on the equity portfolio.
Headquartered in Tampa, Florida, the company, which provides managed care health plans, has a $13.75 billion market cap; its shares were trading around $274.98 on Wednesday with a price-earnings ratio of 28.52, a price-book ratio of 3.32 and a price-sales ratio of 0.67.
Based on the Peter Lynch chart, the stock appears to be overvalued.
Supported by adequate interest coverage and a high Altman Z-Score of 3.10, WellCare’s financial strength was rated 7 out of 10 by GuruFocus.
The company’s profitability and growth scored a 6 out of 10 rating, driven by operating margin expansion and good returns that outperform industry peers. The company also has a moderate Piotroski F-Score of 4 and a one-star business predictability rank.
With 2.12% of outstanding shares, Vanguard is the company’s largest guru shareholder. Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Pioneer, Lee Ainslie (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio) and Caxton Associates (Trades, Portfolio) also own the stock.
Federal Street Acquisition
Eaton Vance bought 247,646 shares of Federal Street Acquisition for an average price of $10.07 per share, expanding the equity portfolio 0.23%.
The Boston-based blank check company, which was created for the purpose of effecting a merger, capital stock exchange, asset acquisition stock purchase, reorganization or similar business combination, had a $581.33 million market cap; its shares ceased trading on Jan. 3 at $10.11 with a price-book ratio of 116.21.
The price chart shows the stock gained 4% since September 2017.
The company announced the completion of its merger with Thomas H. Lee Partners LP and Agiliti Health Inc. (formerly Universal Hospital Services) on Jan. 4. The combined entity is now known as Agiliti Inc.
Other gurus who benefited from the transaction were Louis Moore Bacon (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio).
Additional trades
During the quarter, the fund also added to several holdings, including Abbott Laboratories (ABT, Financial), Johnson & Johnson (JNJ, Financial), Anthem Inc. (ANTM, Financial), Humana Inc. (HUM, Financial) and Merck & Co. Inc. (MRK).
Eaton Vance’s $1.05 billion portfolio is composed of 61 stocks. According to its fact sheet, the fund outperformed its benchmark in 2018 with a return of 5.98%. The MSCI World Health Care Index posted a 2.51% return.
Disclosure: No positions.
Read more here:
