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What do the top hedge fund and mutual fund gurus like in the big pharmaceuticals and generic pharmaceuticals (BPGP) industry? This article, the fourteenth in a series, identifies through research of the latest available institutional 13-F filings the gurus who are most invested in those industry, and the specific BPGP stocks they prefer to hold in their portfolios. The first 12 articles in the series identified Gurus that are over-weight in the Solar sector, Utilities sector, China stocks, Airline sector, Optical Networking sector, Chemicals industry, Oil and Gas Exploration Industry, the Automobile Industry, the Biotech Industry, the Consumer Non-Durable Goods Sector, the Gold and Silver Mining Industry, and the Regional Banking Industry, and the stocks within those sectors that they hold in their portfolios. Definitions of "guru" and other jargon can be found there as well.
The total capitalization of the US equity markets is somewhere in the $15 trillion range, and the total market capitalization of leading BPGP companies is $1.29 trillion, which is approximately 8.6% of the overall market. The table lists four investment gurus whose funds have invested more than that average of 8.6% in the industry. The following is a list of their picks in that sector:
  • U.S.-based big pharmaceuticals such as Johnson & Johnson (NYSE:JNJ) developing healthcare products and provides related services to the consumer, pharmaceutical and medical markets; Pfizer Inc (NYSE:PFE), developing branded prescription drugs for cardiovascular and metabolic diseases and other conditions; Merck & Co (NYSE:MRK), developing prescription drugs to treat asthma, osteoporosis, cardiovascular, metabolic and other disorders; Abbott Laboratories (NYSE:ABT), developing pharmaceuticals, diagnostic systems, nutritional supplements, vascular products, ophthalmic products and eye care products; Bristol-Myers Squibb Co (NYSE:BMY), developing branded pharmaceuticals for the treatment of cardiovascular, virological, and other infectious diseases; and Lilly Eli & Co (NYSE:LLY), developing branded pharmaceuticals to treat neurological, endocrinological, oncological, and cardiovascular diseases.
  • Foreign big pharmaceuticals such as Sanofi Aventis (NYSE:SNY), a French developer of pharmaceutical products and vaccines targeting various therapeutic areas; and Astrazeneca PLC ADS (NYSE:AZN), a U.K.-based developer of branded prescription therapeutics to treat various diseases and conditions.
  • Generic pharmaceuticals such as Watson Pharmaceuticals (WPI) that develop generic and branded drugs including oral contraceptives, analgesics, and smoking cessation aids; and Endo Pharmaceuticals Holding (NASDAQ:ENDP), developing branded and generic pharmaceutical products that treat various conditions such as pain and overactive bladder.
Table
Fund and Guru
Type of Fund
Assets Under Management
Percent Portfolio in Big and Generic Pharmaceuticals
Major Big and Generic Pharmaceuticals positions in Portfolio
GMO (Jeremy Grantham)
Mutual Fund
$107 billion including $ 29.4 billion in Equities
14.3%
JNJ, PFE, MRK, ABT, BMY, LLY
Chou Associates Management Inc. (Francis Chou)
Mutual Fund
$ 510 million
11.7%
WPI, SNY
Tremblant Capital Group (Brett Barakett)
Hedge Fund - Long/Short
$ 1.9 billion
10.4%
PFE
Hussman Econometrics Advisors, Inc. (John Hussman)
Mutual Fund
$ 6.3 billion
10%
AZN, BMY, ENDP, MRK, PFE, JNJ, ABT
Jeremy Grantham is one of the co-founders of Grantham Mayo Van Otterloo, a Boston-based asset management firm that manages over $107 billion in total client assets. Besides its headquarters in Boston, GMO has offices in San Francisco, London, Zurich, Singapore, and Sydney. Besides the equities markets, GMO also is regarded as a highly knowledgeable investor in various stock, bond and commodity markets. Grantham's philosophy can be summarized by his commonly-used phrase, "reversion to the mean." Essentially, he believes that all asset classes and markets will revert to mean historical levels from highs and lows.
His firm seeks to understand historical changes in markets and results for seven years into the future. When there is deviation from historical means (averages), the firm may take an investment position based on a return to the mean. The firm allocates assets based on internal predictions of market direction.
Francis Chou is the fund manager for the Chou America Mutual Fund. The investment process followed in selecting equity investments for the funds is a value-oriented approach to investing. This involves a detailed analysis of the strengths of individual companies, with much less emphasis on short-term market factors. Far greater importance is placed upon an assessment of a company's balance sheet, cash flow characteristics, profitability, industry position, special strengths, future growth potential and management ability.
Tremblant Capital Group, a hedge fund formed in 2001 by Brett Barakett, invests in long/short strategies.
Dr. Hussman, founder of Hussman Econometrics Advisors, manages the Hussman Funds, which are diversified, no-load mutual funds for investors seeking long-term investment returns, with added emphasis on capital protection in unfavorable market conditions. Prior to managing the Hussman Funds, he was a professor at the University of Michigan. He is widely known for his criticism of the U.S. Treasury and the Federal Reserve and for predicting the 2008-09 U.S. recession; as of late 2009, he is calling for another financial crisis due to bad policy choices made by the U.S. government.
Credit: Historical fundamentals including operating metrics and stock ownership information were derived using I-Metrix by Edgar Online, Zacks Investment Research, Thomson Reuters and Briefing.com. Fund data including assets under management and firm profiles are sourced mostly from Hedgetracker.com. The information and data is believed to be accurate, but no guarantees or representations are made.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Source: Top Big and Generic Pharmaceutical Picks by Fund Gurus Concentrated in the Sector