From a financial perspective, 2013 was a banner year for many
Increased economic confidence, recovering housing markets and
super-sized returns from the major indices made the recession of
2008 all but a distant memory.
The S&P 500 delivered a gain of nearly 30%, propping up
retirement accounts and prompting even greater inflows into funds
of all kinds: index, mutual and hedge. As is typical after the
end of each year, we're inundated with rankings and commentary to
see just how these asset managers actually performed -- a tough
comparison when passive investments gave such outsized returns
with little to no fees.
Exceptional stock-picking, properly managed risk, and a
long-only bias separated the gurus from the rest of the pack --
and one manager stood out handily from his peers, grabbing the
top spot as the best-performing large hedge fund, according to
Larry Robbins of Glenview Capital Management delivered an
astounding 84% return with his Capital Opportunity Fund. How'd he
do it? By going long the health care industry, betting it would
get a boost from the passing of the Affordable Care Act.
Fortunately for Robbins and his investors, it did just that.
His latest Form 13F shows that he's not done buying up health
care stocks just yet, and he's been vocal about his optimism for
2014 as well. Let's take a closer look at some of his latest
was the biggest new position that Robbins made in the first
quarter of this year, committing over $420 million to the largest
health benefits company in the Blue Cross Blue Shield
Association. Many observers thought WellPoint would struggle
under Obamacare, but the company expects over 1 million new
customers this year.
Robbins expects the worst is behind WellPoint. The stock price
seems to agree, registering a gain of nearly 17% this year. This
leaves WLP trading at 12 times forward earnings, relatively low
compared to its peers. Additionally, WellPoint pays a small
dividend of 1.6%.
UnitedHealth Group (NYSE:
possesses some of the same operational qualities as WellPoint.
Glenview Capital invested about $140 million into the diversified
health care company, joining billionaires Leon Cooperman and
Mario Gabelli among UNH investors.
UnitedHealth Group will be pushing to expand the state
exchanges it operates on in 2014 and 2015, increasing its
offerings to the next wave of ACA enrollees. From a shareholder
standpoint, UNH has announced positive news recently in the forms
of a renewed share buyback program, as well as a 34% increase in
its dividend, bringing the yield up to 1.9%.
Quest Diagnostics (NYSE:
, the clinical laboratory services company, was allocated about
$110 million of Robbins' assets under management, making it the
eighth-largest new position originated by Glenview last quarter.
Unlike WLP and UNH, DGX hasn't had the same increases in stock
price looking back a year: Shares are down slightly over the past
Quest stands out, however, in that it offers one of the
highest dividends amongst Glenview's newest positions, paying
2.3% to investors. Despite lackluster earnings lately, some
equity analysts are optimistic about the long-term outlook of
Quest Diagnostics as baby boomers become a wider part of the
company's client base.
Risks to Consider:
As every prospectus or investment disclaimer will tell you,
past performance is not indicative of future results. Many hedge
fund managers have had standout years only to follow them with
dismal results in ensuing periods --
and his post-subprime bets come to mind.
Action to Take -->
With enrollment goals shattered and the issues plaguing
Healthcare.gov resolved, the previous hiccups of Obamacare have
now led to a gust of wind propping up most of the industry as a
whole. Robbins, the current man of the hour, continues to see
some easy money on the horizon, so do your own research to figure
out whether these three stocks (or other health care names)
belong in your portfolio.
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