HealthCor Management is a $3 billion healthcare hedge fund founded by Arthur Cohen and Joseph Healey.
Cohen graduated from the University of Virginia in 1983 with a B.A. degree in Commerce and received his M.B.A. in Banking and Finance from Hofstra University in 1986. He worked for Julian Robertson between 1995 and 2000. He was responsible for healthcare investments as a Managing Director at Tiger Management. He partnered with Joseph P. Healey in September 2005.
Healey is a brilliant stock picker (See Joseph Healey's stock recommendations at the 2009 Ira Sohn Conference). Cohen and Healey invest significant amounts in the healthcare industry by diversifying their portfolio in different stocks. Nearly two thirds of his investments are in the healthcare sector.
Cohen's Healthcor Management LP had 51 securities in its 13F portfolio as of December 31, 2010. We noticed that Arthur Cohen has been holding 10 of these securities during last three years. In the last quarter of 2010, he sold 16 securities and bought 24 new securities. The two largest stocks that Cohen sold in the last quarter are Aetna Inc. (AET) and Align Technology Inc (ALGN). AET has returned 27.4% and ALGN has returned10.5% since the end of December.
Here are HealthCor’s 10 largest new stock picks:
Top Ten New Holdings | ||
Stock | Value in Millions (USD) As of Dec 31,2010 | Return Since Dec 31,2010 |
BAXTER INTL INC COM STK (BAX) | 58.2 | 2.7% |
PALL CORP COM STK (PLL) | 39.7 | 9.4% |
INTERMUNE INC COM STK (ITMN) | 32.8 | 2.1% |
ABBOTT LABORATORIES COM STK (ABT) | 28.7 | 0.4% |
SAFEWAY INC (SWY) | 27.0 | -4.2% |
STRYKER CORP COM (SYK) | 26.9 | 17.4% |
ZIMMER HOLDINGS INC COM STK (ZMH) | 24.2 | 15.9% |
CUBIST PHARMACEUTICALS INC CO (CBST) | 20.9 | 2.3% |
XENOPORT INC COM STK (XNPT) | 14.5 | -13.8% |
KROGER CO COM STK (KR) | 11.2 | 1.2% |
Value Weighted Return of Top 10 New Holdings | 284 | 4.3% |
SPY | 4.3% | |
Only three of Cohen's top 10 new positions managed to beat the market. Cohen’s largest new stock picks have gained 4.3% since the end of 2010, vs. 4.3% gain for the SPY. SYK has had one of the best performances in his portfolio since the end of December. Cohen had $26.9 million in SYK shares at the end of December. SYK has gained 17.4% in the last two months, beating the SPY by 13.1 percentage points. BAX was Cohen's biggest new investment at the end of December 2010. BAX has gained 2.7% since then, underperforming the SPY’s 4.3% return. Cohen has $58.2 million invested in BAX. Tom Steyer’s Farallon Capital Management increased its BAX shares during the last quarter of 2010. PLL is one of the Roberto Mignone’s Bridger Management ’s top 25 positions at the end of 2010. Smead Value Fund’s Bill Smead stated that ABT is a good investment choice in 2011. The worst performing stock among the new purchases was Xenoport Inc, losing 14.5% since the end of December.
We think it’s more appropriate to check out Cohen’s 10 largest positions to understand more about his performance. Here are the results:
Top Ten Holdings | ||
Stock | Value in Millions (USD) As of Dec 31,2010 | Return Since Dec 31,2010 |
COVIDIEN PLC COM STK (COV) | 274.4 | 13.1% |
GILEAD SCIENCES INC COM STK (GILD) | 244.6 | 7.7% |
CIGNA CORP COM STK (CI) | 243.8 | 1.0% |
AMERISOURCEBERGEN CORP COM STK (ABC) | 179.8 | 9.2% |
LIFE TECHNOLOGIES CORPORATION (LIFE) | 169.3 | -5.3% |
MAGELLAN HEALTH SERV ICES INC (MGLN) | 141.8 | 1.6% |
NEKTAR THERAPEUTICS SHS (NKTR) | 117.8 | -29.0% |
UNIVERSAL HEALTH SERVICES INC (UHS) | 114.2 | 10.7% |
HUMANA INC COM STK (HUM) | 101.3 | 15.7% |
ILLUMINA INC COM STK (ILMN) | 95.0 | 6.5% |
Value Weighted Return of Top 10 New Holdings | 1,682 | 4.0% |
SPY | N/A | 4.3% |
COV was Cohen's biggest investment at the end of December 2010. COV has gained 13.1% since the end of December, outperforming the SPY’s 7.0% return. Cohen increased his exposure by 60.3% in the last quarter. Cohen bought $90 million of HUM shares during the last quarter of 2010. HUM has returned 15.7% since the end of December.
During the fourth quarter, Bruce Berkowitz started to reduce his HUM holdings. Jim Simons’ Medallion Fund had nearly $137 mllion invested in HUM at the end of December. Cohen's 10 largest positions have returned 4.0% since the end of December, underperforming the SPY by 4.3 percentage points.
Return of Long Term Holdings in Last 3 Years | ||
Stock | Value in Millions (USD) As of Dec 31,2010 | Return Since Mar 03,2008 |
CIGNA CORP COM STK (CI) | 243.8 | -4.7% |
AMERISOURCEBERGEN CORP COM STK (ABC) | 179.8 | 85.4% |
LIFE TECHNOLOGIES CORPORATION (LIFE) | 169.3 | 25.7% |
MAGELLAN HEALTH SERV ICES INC (MGLN) | 141.8 | 14.4% |
NEKTAR THERAPEUTICS SHS (NKTR) | 117.8 | 31.2% |
HUMANA INC COM STK (HUM) | 101.3 | -7.4% |
CORVEL CORP COM STK (PLL) | 24.4 | 46.8% |
PERKINELMER INC COM STK (CRVL) | 21.1 | 63.8% |
TRIMERIS INC COM STK (ZMH) | 10.9 | -17.7% |
RTI BIOLOGICS INC COM STK (PKI) | 2.7 | 15.5% |
Average Return | 1,013 | 25.3% |
SPY | N/A | 4.6% |
The above table shows the performance of Cohen’s long-term stock holdings. Cohen’s largest investment over the last three years is CI. He increased his holding by 21% during the last quarter of 2010. Lee Ainslie , Andreas Halvorsen , and David Tepper’s are also among the hedge fund managers with CI investments. ABC is one of Lee Cohen's best performing long term investment which returned 85,4% in the last three years. Cohen’s largest long term holdings have gained 25.3% since March 2008.
Considering SPY’s 4.6% return, Cohen's long term picks are extremely successful. Investors might benefit from Healthcor's wisdom by imitating their long-term stock holdings.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
