Glenview Capital Adds to Tenet Healthcare Position: Why They Like THC ~ market folly

Tuesday, September 18, 2012

Glenview Capital Adds to Tenet Healthcare Position: Why They Like THC

Larry Robbins' hedge fund Glenview Capital just filed an amended 13G with the SEC regarding their position in Tenet Healthcare (THC).  Per the filing, Glenview has now disclosed a 12.68% ownership stake in THC with 52,823,831 shares.

This marks a 28% increase in the number of shares they own.  Due to the disclosure dates, they've added these shares between July and September.  The 13G from today was filed due to trading activity on September 14th.

Why Glenview Likes Tenet

On the heels of the Affordable Care Act (ACA) passing, Tenet was one of Glenview's core holdings.  The hedge fund originally started its stake in THC back in March.  Their thesis is essentially that for-profit hospitals are entering a "growth on growth" phase due to expanded health insurance coverage.

In the free sample of our quarterly newsletter, we highlighted the following:

"Robbins laid out his long thesis for hospitals by pointing out that EBITDA has grown every year for them as they offer 9% CAGR, 1% admission growth, and 2% leverage.  He says hospitals benefit from Medicaid eligibility as it reduces bad debt expense ... Robbins points out that it's unlikely that the government could unilaterally take a for profit hospital's profits from reimbursement."

Consensus EPS growth for 2011-13 for THC had been around 28% while Glenview expects 41% from 2011-2014.  Glenview also believes that meaningful share repurchase opportunities and/or tuck-in acquisitions are possible.

As of the end of Q2, the hedge fund also owned other companies in the space, including: HCA (HCA), Health Management Associates (HMA), and LifePoint Hospitals (LPNT).  That said, THC does seem to be their largest position in the segment and shares recently hit 52-week highs.

Per Google Finance, Tenet Healthcare is "an investor-owned health care services company whose subsidiaries and affiliates own and operate acute care hospitals, ambulatory surgery centers, diagnostic imaging centers and related health care facilities. Its core business is focused on providing acute care treatment, including inpatient care, intensive care, cardiac care, radiology services and emergency medical treatment, as well as outpatient services."

To see what other positions this hedge fund owns, check out the latest issue of our premium newsletter.

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