Former trader for Leon Cooperman's Omega Advisors, Larry Robbins, runs Glenview Capital, a multi-strategy investment firm with over $5 billion in AUM. At the funds height, pre-financial crisis, AUM topped $9 billion in AUM. In a two part series, we take a look at his top holdings. This is the second part of the article.
LIFE TECHNOLOGIES CORP
CROWN CASTLE INTL
AMERICAN INTERNATIONAL GROUP
THERMO FISHER SCIENTIFIC
FIDELITY NATIONAL INFO SVCS
CARDINAL HEALTH INC
B M C SOFTWARE INC
Thermo Fisher Scientific is the fifth largest position in Larry Robbins' portfolio. It is the largest life science tools company. Management believes that the company can generate earnings growth in excess of 10% next year with or without sequestration cuts, which is higher than we would have guessed but positive nonetheless. Organic growth is a primary focus in the tools space, and we believe that TMO can continue to post moderate numbers through margin expansion, share repurchases, and tuck-in acquisitions. The company's foray into the attractive companion diagnostics market will be a potential source of this organic growth though we do not expect any immediate contributions to the bottom line. Though we are only modestly bullish, we do think the stock can trade above $60 a share with its long-term goals such as sales of $14.5 to $15.5 billion, EPS of $7.50 to $8.75 by 2016, and organic growth of mid-single digits until then.
Cigna is the third largest healthcare pick in Glenview's portfolio. Cigna is chugging along with a stable business and a smooth integration of Healthspring. With overall weaker-than-expected Q1 earnings for managed care companies, the sell-off seems unwarranted, especially for CI which has met a many of the strategic goals for international growth and deeper product penetration, the company set three years ago. Healthspring's President has commented that the integration is on track, with enrollment growth accelerating in 2014. Additionally, meeting medical loss ratio (MLR) minimum that year will not be an issue though we weren't concerned about that either. The international segment will continue to be a "mid-teens revenue and earnings grower," and the commercial segment is successfully signing more customers that value consumer engagement over a unit cost model. Importantly from our perspective, pricing seems reasonable aside from some regional competition in CA and NY, but overall we are positive on CI.
Fidelity National Information Services , not to be confused with the diversified holding company, Fidelity National Financial (FNF), is a provider of bank processing platforms and services. Starting this year, FIS altered its business strategy from integrating acquisitions to optimizing its current business mix accompanied by a capital allocation plans that involves paying a bigger dividend, imitating more stock buybacks, and decreasing M&A activity. By leveraging its existing broad distribution footprint, we think the company's newfound focus will increase margins and profitability and do not think the market is fully appreciating this strategic move.
Cardinal Health is a top player in the drug distribution industry also held by Jay Venkatesen, Leighton Welch, and Andreas Halvorsen. Recent questions from investors have related to generic price trends. Management has indicated that older generics will likely see the same dynamics with supply shortages in the near-term due to high demand. They point out that growth in generics will be driven by both new launches and increased penetration. Our focus is on China becoming a new area for CAH with the Yong Yu asset that allows CAH to own 100% of a Chinese company versus through a JV/partnership. There are numerous challenges to operate in the region like anti-corruption and supply chain integrity, but CAH is determined to become a valued partner for pharma companies and medical device manufacturers alike. We view growth potential in this region-from ten cities to perhaps twenty five-as a major catalyst.