is a top-ranked health care investor who has managed the Vanguard
Health Care Fund (
) since its inception in 1984. He has a long-term,
valuation-oriented focus. In the last five years, Owens beat the
S&P 500 with a 21.9% cumulative return versus its 1.1% loss.
Over ten years, he achieved a 91.6% return compared to its 34.9%
Last quarter, Owens bought only one new health care stock. In the
second quarter, he found two new opportunities and added to
several others. The new buys are: Allscripts Healthcare Solutions
's famous short, Green Mountain Coffee Roasters (
). His two largest adds are Roche Holding (
) and Teva Pharmaceutical Industries (
Owens bought 2,439,400 shares of new holding
Allscripts Healthcare Solutions (
at an average price of $12 in the second quarter. Since his
purchase the stock has dropped 26% to trade for $9 on Thursday.
Allscripts provides electronic solutions for health care
providers. In April, its stock fell from $16 to under $11 when it
lowered its 2012 guidance. Its original guidance was non-GAAP
revenue of $1.62 billion to $1.65 billion, and non-GAAP diluted
earnings per share $1.06 to $1.10. The newly revised guidance is
for $1.48 to $1.52 billion in non-GAAP revenue and non-GAAP
diluted earnings per share of $0.74 to $0.80.
The company said in its earnings release that it had lower than
expected sales and that its investments in improving client
experience and accelerating product development and higher than
expected software development expenses pressured its bottom line.
It gained three new clients in the quarter but also had a number
of them postpone commitments while they waited for the company to
introduce new releases and have better integration. Along with
reorganization, these issues lowered sales.
This may be a temporary setback for a company whose top line has
exhibited strong growth. In the last ten years, its revenue per
share grew at an annual rate of 12.7%. Earnings growth has been
slower, with a 2.5% EBITDA-per-share growth rate in the last five
years. In the fourth quarter and full-year 2011, Allscripts had
record bookings, accelerating revenue growth, strong earnings
growth and record operating cash flow.
Owens bought 1.1 million shares of
Green Mountain Coffee Roasters (
at an average price of $31 in the second quarter. Green Mountain
is down 79% over the last year off its $115.98 high. The stock
began to tank after
gave his famous 110-slide PowerPoint against the company in
The stock appeared that it was going in recovery in 2012, but a
revised outlook for the year cut the price in half, from about
$50 to about $25 in May. The company said it expects total net
sales in the range of $3.79 billion to $3.84 billion and non-GAAP
EPS in a range of $2.21 to $2.26 per diluted share for fiscal
2012. Analysts were expecting revenue of $3.87 billion and EPS of
$2.37 for fiscal 2012, according to Reuters.
, in his second quarter letter, noted that the stock was his
biggest winner in the second quarter. "The company announced
disappointing quarterly results and lowered its guidance.
Investors are beginning to consider the ramification of the
coming K-cup patent expirations. Several leading retailers have
indicated that they will take shelf space away from GMCR to make
room for lower cost, private label K-cups. (In some instances,
GMCR will supply the private label K-cups at a very low margin.)
Recent store checks show that the price of K-cups is already
falling - almost as fast as GMCR's stock price."
Owens bought 3,609,657 shares of
Roche Holding (
at an average price of $42 in the second quarter. Roche Holding
is a pharmaceutical company with distribution in Europe, the
U.S., Asia and Latin America.
Roche Holding has had considerable growth over the last decade.
It grew revenue per share at an annual rate of 14.6% and EBITDA
per share at an annual rate of 17.9%. The company's cash flow
also grew substantially, from $1 billion in 2000 to $12.9 billion
in 2011. Net income also reached its highest level in 2011 at
In its first quarter of 2012, the company's sales rose 1% in U.S.
dollars over the previous year, with approvals for two new,
first-in-class skin cancer medicines and five out of five
late-stage clinical studies reporting positive results. The
company also confirmed its full-year outlook for 2012 for
pharmaceutical sales growth in the low to mid-single-digit rates.
Owens added 4.1 million shares of
Teva Pharmaceutical Industries (
to his holding at an average price of $42, by far his largest
purchase of the company he first bought shares of in the second
quarter 2011, when it traded for $49 on average. Teva's stock has
slipped almost 6% over the last year.
Teva the largest generic pharmaceutical company in the world,
marketing about 400 generic medications and 50 brand-name drugs,
with approximately 180 new generics awaiting FDA approval. Teva
has been growing its revenue and EBITDA per share a high average
rate of 16% and 21.4% annually over the last decade. The company
has $1.1 billion in cash on its balance sheet, but considerable
long-term liabilities and debt of $13.6 billion. The company is
also trading at a P/E of 12.29, lower than its pre-2011 levels.
Teva's second-quarter results also showed growth and affirmed it
is on the path toward meeting its goals for the 2012 year. Strong
growth in both its branded and pharmaceutical drugs drove 19%
year-over-year sales growth, lower than expectations, with 28%
revenue growth in the U.S. and 16% growth in generic medicine
after introducing four new generic drugs. Branded medicines were
up 35%. Net revenues in Europe were flat, where generic drugs
fell 12 percent due primarily to a stronger dollar, and branded
drug sales grew 46%. The company derives 30% of its sales from
Europe. Sales in the rest of the world increased 30%, driven by
results of from its acquisitions and strong sales in several
The top stocks in Owens' portfolio are Merck & Co. (
), UnitedHealth Group (
) and Forest Laboratories (
See the rest of Edward Owens' stock picks for the Vaguard Health
Care Fund in the portfolio here.
Also check out the Undervalued Stocks, Top Growth Companies, and
High Yield stocks of Edward Owens.About GuruFocus: GuruFocus.com
tracks the stocks picks and portfolio holdings of the world's
best investors. This value investing site offers stock screeners
and valuation tools. And publishes daily articles tracking the
latest moves of the world's best investors. GuruFocus also
provides promising stock ideas in 3 monthly newsletters sent to