New York-based hedge fund company Visium Asset Management LP has $3.4 billion in U.S. equity assets under management and was founded in 2005. Visium is led by Managing Partner and Chief Investment Officer Jacob Gottlieb. The firm manages the Visium Balanced Fund LP, the Visium Institutional Partners Fund LP, the Visium Global Fund LP, and the Visium Credit Opportunities Fund. Of these, the Visium Global Fund has returned 36.8% annualized since inception and the Visium Balanced Fund has returned 13.0% annualized since inception. The Visium Balanced Fund pursues a fundamentals-driven, long/short equity strategy with a primary focus on picking the best ideas in the healthcare sector, mainly in the U.S.
The fund holds a diversified portfolio of 272 positions, with 35% each of its holdings in large-caps, 40% in mid-caps, and the remaining 25% in small-cap and micro-cap equities. Its portfolio turnover is 150%, implying an average holding period of eight months. Based on the most recent SEC 13-F filing for the March 2011 quarter, we determined that 82% of its portfolio is in the healthcare sector, and almost all of the remaining 18% is in healthcare-focused retail, technology and services companies.
The following table summarizes its largest new buys and sells in the healthcare industry in the latest reported 13-F filing for the March 2011 quarter, and updated based on any 13-G filings since the end of the quarter:
Medicis Pharmaceutical (MRX) is a developer of branded pharmaceutical products to treat dermatological and aesthetic conditions. Visium added its largest new $100 million position in this company. Medicis trades at a forward 12 price-to-earnings (P/E) ratio, while earnings growth is expected to moderate to the mid-single-digits going forward. Visium added this position probably in the mid- to high-$20s last quarter, a price at which it was attractive. However, we would not be buyers here in the high-$30s.
Perrigo Co. (PRGO) is a developer of over-the-counter and generic pharmaceuticals, diagnostics and nutritional products and active pharmaceuticals. Visium bought $56 million worth of shares in the company for its third largest new position. Perrigo trades at a forward P/E of 19, near the top of its historic P/E range, while earnings are projected to rise from $2.95 in 2010 to $3.98 in 2011 to $4.56 in fiscal year 2012. Analyst targets are in the $90-$110 range. Of the thirteen analysts covering the stock, six rate it a buy, four a hold, two underperform, and one at a sell rating. Visium added this position probably in the low-$70s last quarter, a price at which it was attractive. However, we would not be buyers here in the high-$80s.
Hospira, Inc. (HSP) is a developer of specialty injectable pharmaceuticals and drug and IV fluid delivery systems. VIsium added a new $42 million position in the company. Hospira trades at a forward P/E of 12-13, near the bottom of its historic P/E range. Analyst targets are in the mid-$60s, almost 20% above current prices. Of the 15 analysts covering the stock, ten rate it a buy/strong buy, four a hold, and one rates it at a sell. Hospira is also a favorite among high alpha generating or guru hedge and mutual funds, including Oakmark Funds (owns $468 million of stock), Eton Park Capital Management LP ($83 million), Viking Global Investors LP ($34 million), Zweig-DiMenna Associates ($7 million) and SAC Capital Advisors LP ($2 million).
Valeant Pharmaceuticals (VRX) develops primarily branded drugs to treat central nervous system disorders, pain and cardiovascular disease. Visium opened this position in the high-$20s at the end of 2010, so its selling out of this position in the $40s last quarter was profit-taking. Valeant trades at a forward P/E of 16, at the top of its P/E range. While the stock has gone up three-fold in the last year, and more than five-fold since the low in the 2008/09 crisis, there may still be additional upside in the stock. The company's product portfolio comprises approximately 490 products, and analysts have been upbeat about the company, projecting that earnings will continue rising to $2.79 in the fiscal year ended December 2011. That's well above the $1.73 generated in the prior fiscal year 2010, and they will rise even more to $3.30 in the fiscal year ending December 2012. In the low-$50s, Valeant has formed a long-term technical base hitting the mid-$50s all-time high from 2001, so it would be quite natural for it to consolidate here and correct say 15%-20%. We would buy Valeant into the mid-$40s and accumulate it on the way down if it corrects more. Valeant is a favorite among high alpha generating or guru hedge and mutual funds, as even after the meteoric rise from $6 in 2008/09 crisis to the $50 by the end of the March 2011 quarter, guru funds together held almost $3 billion of stock. This includes Ruane Cunniff & Goldfarb Inc. ($1.83 billion), Blue Ridge Capital Holdings LLC ($445 million), Viking Global Investors ($330 million), Brave Warrior Capital LLC ($119 million), First Eagle Investment Management LLC ($92 million), Private Capital Management ($70 million), Zweig-DiMenna Associates ($22 million), Hussman Econometrics Advisors ($20 million) and others.
AmerisourceBergen Corp. (ABC) distributes brand name and generic drugs, over-the-counter healthcare products and home healthcare supplies. Visium dropped most of its position, cutting $90 million from its $92 million prior quarter position. The position was opened in the $20 range in the second quarter of 2008, so the selling in the high-$30s last quarter was profit-taking. AmerisourceBergen trades at a forward P/E of 15, at the top of its historic P/E range. Analyst targets are in the mid-$40s, slightly above current $41 price. Of the 20 analysts covering the stock, 15 rate it a buy/strong buy and five a hold. We believe AmerisourceBergen is fully priced and would sell it here, as while there is some upside as the company continues to perform, the execution risk to the downside is more significant at such premium valuations.
Healthcare facilities: Buy Express Scripts Inc. (ESRX). Visium added $100 million to its $65 million prior quarter position in this group, including adding a new $74 million position in Express Scripts, a provider of pharmacy benefit management services to managed care organizations, employers, insurers and administrators. Express Scripts trades at a forward 14 P/E, in the bottom 1/3rd of its P/E range, while earning are projected to grow from $2.47 in 2010 to $3.94 in 2012 at 26% compounded annual rate. Analyst targets are in the mid-$60s to $70. Of the 29 analysts covering the stock, 20 rate it a buy/strong buy, eight a hold and one at an underperform rating.
Medical Equipment and Supplies: Sell Allscripts Healthcare Solutions (MDRX). Visium dropped its $49 million position in Allscripts Healthcare Solutions (MDRX), a provider of clinical, connectivity and patient information software applications for healthcare providers. The position was opened in the high-teens in the second quarter of 2010, so the dropping in the $20 range last quarter is a high conviction move. Allscripts Healthcare trades at a forward 18 P/E, at the top of its P/E range, while earning are projected to grow at double digit rates from 74 cents in 2010 to $1.06 in the 2012 fiscal year. Analyst targets are in the mid-$20s; and of the 24 analysts covering the stock, 15 rate it a buy/strong buy, eight a hold and one at an underperform rating. We believe Allscripts is fully valued and would be sellers into any strength in the low- to mid-$20s.
Market Value at end of March 2011 Quarter
Change in Value from Prior Quarter
Percent of Portfolio
Percent Shares Owned
New 13G 5% Ownership Filing Since End of March 2011 Quarter
Top Buys and Sells
Warner Chilcott Plc Ireland
Medicis Pharmaceutical Corp
Express Scripts Inc
Valeant Pharmaceuticals Intl I
Allscripts Healthcare Solutns
Impax Laboratories Inc
CVS Caremark Corporation
NPS Pharmaceuticals Inc
Medco Health Solutions Inc
Molina Healthcare Inc
Par Pharmaceutical Cos Inc
Health Care REIT Inc
Credit: Historical fundamentals including operating metrics and stock ownership information were derived using SEC filings data, I-Metrix® by Edgar Online®, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.
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