Glenview Capital Management’s Larry Robbins (Trades, Portfolio) disclosed last week he expanded his stake in Brookdale Senior Living Inc. (BKD, Financial) by 17.84%.
With the goal of delivering attractive absolute returns, the guru’s New York-based hedge fund focuses on deep fundamental research and individual security selection. It operates two funds: the Glenview Fund, a long-and-short strategy, and the Glenview Opportunity Fund, which is more concentrated. Most of its investments are in U.S. stocks, but it does have some exposure to Western Europe.
According to GuruFocus Real-Time Picks, a Premium feature, Robbins invested in 3.28 million shares of the Brentwood, Tennessee-based company on Sept. 25, bringing his total position to 21.7 million shares. The holding now represents 1.49% of the equity portfolio. The stock traded for an average price of $7.60 per share.
GuruFocus estimates he has lost 61% on the investment since establishing it in the second quarter of 2014.
The company, which operates senior living and retirement communities throughout the U.S., has a $1.37 billion market cap; its shares were trading around $7.40 on Monday with a price-book ratio of 1.6 and a price-sales ratio of 0.33.
The median price-sales chart shows the stock is trading below its historical average, suggesting it is undervalued.
Brookdale reported its second-quarter results on Aug. 5, posting an earnings loss of 30 cents per share on $1.02 billion in revenue.
On Sept. 27, the company announced it entered a support agreement with its largest shareholder, Glenview Capital. According to the terms of the deal, the firm agreed to vote in favor of the company’s two director nominees, Victoria Freed and Gay Sansone, at the upcoming annual shareholder meeting on Oct. 29.
In a statement, Robbins said he appreciates "the shareholder outreach undertaken by Cindy Baier and the team at Brookdale over the past several months" and is "proud to commit our votes" to adding Freed to the board and Sansone as the next board chair.
"We look forward to the board, management and shareholders working cooperatively to elevate the customer experience, operating efficiently and responsibly and driving shareholder value," he added.
Weighed down by a low cash-debt ratio and poor interest coverage, GuruFocus rated Brookdale’s financial strength 3.2 out of 10. In addition, the Altman Z-Score of 0.13 warns the company could be at risk of going bankrupt.
The company’s profitability and growth fared a bit better, scoring a 5 out of 10 rating on the back of margins and returns that underperform a majority of competitors. Brookdale also has a moderate Piotroski F-Score of 5, which indicates operations are stable. Despite recording a decline in revenue per share over the past three years, the company also has a business predictability rank of one out of five stars. According to GuruFocus, companies with this rank typically see their stocks gain an average of 1.1% per annum over a 10-year period.
As noted previously, Robbins’ firm is the company’s largest shareholder with 11.71% of outstanding shares. Other top guru investors are Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Steven Cohen (Trades, Portfolio), Chuck Royce (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio).
Portfolio composition
Robbins’ $11.04 billion equity portfolio, which is composed of 46 stocks as of the end of the second quarter, is heavily invested in the health care sector.
Other health care providers the guru has positions in are DaVita Inc. (DVA, Financial), HCA Healthcare Inc. (HCA, Financial), Tenet Healthcare Corp. (THC, Financial) and Universal Health Services Inc. (UHS, Financial).
Disclosure: No positions.
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