Larry Robbins & Jacob Gottlieb on Healthcare Plays: Delivering Alpha Conference

At the Delivering Alpha Conference, Larry Robbins of Glenview Capital, Jacob Gottlieb of Visium, and Kris Jenner of Rock Springs Capital sat down to talk the Affordable Care Act and Obamacare.


Larry Robbins, Glenview Capital

Robbins notes that Thermo Fisher Scientific (TMO) is their largest position.  He says it's independent of the Affordable Care Act as it's 75% consumables.  The growth there is driven by capital allocation.  The space will benefit from sequestration ending in 2014.

He also likes Walgreen's (WAG).

Robbins expects an increase in pharmaceutical consumerization after Obamacare starts.  Robbins also noted he still likes McKesson (MCK) ~ we've highlighted in the past how it's been one of his largest holdings for some time.

Glenview's founder notes that healthcare used to trade at a 10% premium to the market, but their portfolio trades at a 25% discount so he loves if companies buy back stock or make acquisitions.  He sees hospitals likely to continue consolidation, which means the for-profit players gain share.

With the Affordable Care Act and more people getting insured, you'll see growth on growth (especially in hospitals) but on the other hand, there will be losers down the chain as they're over-earning now and will get squeezed.

In the space, big pharma have a lot of cash but not a lot of innovation.  Small companies are exactly the opposite, so consolidation will continue there.

If you missed it, Robbins recently made a very rare media appearance and talked about HMA, THC and what he thinks about this market.


Jacob Gottlieb, Visium Asset Management

Jacob Gottlieb of Visium voiced his concern over taxes on healthcare as it could be counterproductive to making more affordable and better quality care.  As far as what his picks go, he likes healthcare IT providers and well-run hospitals.


Kris Jenner, Rock Springs Capital

Kris said there will be winners and losers in all of this.  The opportunities in healthcare are robust and based in innovation.  That innovation will be more-so in business models than new drugs.  He said he likes Vertex Pharmaceuticals (VRTX) and Gilead Sciences (GILD).

Thanks to @EquityNYC for live tweets on this panel.


For more from the Delivering Alpha Conference, head to:

- John Paulson on gold, real estate & merger arbitrage

- Nelson Peltz on PepsiCo & Mondelez 

- Best Ideas Panel with Mark Kingdon, Chris Hohn, Jim Chanos & Lee Cooperman

- Carl Icahn on activism

Notes From Invest For Kids Conference: Ackman, Robbins, Whitney, Zell

The Invest For Kids Conference took place last week in Chicago and was a resounding success, raising over $1 million to benefit local children. We wanted to post up a quick summary of the event, including in-depth notes below from the prominent hedge fund managers that presented. Speakers included Bill Ackman (Pershing Square), Larry Robbins (Glenview Capital), Meredith Whitney, and more. Here are some of their latest investment recommendations:

Bill Ackman of Pershing Square Capital Management: Instead of doling out equity specific investment advice, Ackman instead turned to real estate. At the conference, he proclaimed his bullishness on the housing market and said to buy single family homes, citing home affordability at its highest level in many years. The low interest rate environment obviously helps this but he cautions rates won't stay low for long. This is the same recommendation as John Paulson who said to buy housing recently as well. Stay tuned next week as we'll examine Ackman's latest portfolio in our newsletter, Hedge Fund Wisdom. For our recent posts on the manager, head to Ackman's potential thesis on JC Penney (JCP).

Meredith Whitney of Whitney Advisory Group: Whitney harped on the issues found on the state and local government level regarding their fiscal problems. In short, she feels that municipalities are in trouble, especially New Jersey, Illinois, Massachusetts, and Michigan.

William Browder of Hermitage Capital: Browder focused on emerging markets and an inflationary environment. As such, he tossed out Koza Gold as an idea, a miner in Turkey. He cites their cheap valuation and cheap production costs at $320 an ounce. He also recommended Renhe Commercial Holdings, a shopping mall developer in China.

Larry Robbins of Glenview Capital: Robbins has been presenting the case for McKesson (MCK), Express Scripts (ESRX), and Life Technologies (LIFE) as of late. This conference was no different as he again pointed out the attractiveness of each investment. ESRX is well positioned for the generic drug boom in 2012 and Robbins likes their $6 billion in cash. He fancies LIFE due to its valuation and thinks the company should buyback shares. MCK is attractive due to the company's use of cash to accelerate EPS growth. He also cautioned about mortgage put-backs and appears to be short two banks with high exposure there. Head to our Hedge Fund Wisdom newsletter to view the rest of Glenview's portfolio. We also recently detailed how Glenview increased its position in Punch Taverns.

Joshua Friedman of Canyon Partners: Friedman's suggestion was to play the Lehman Brothers bankruptcy but cautions that it's a complex situation, to say the least. More detailed thoughts are found below.

John W. Rogers of Ariel Investments: Rogers offered three ideas: CBS (CBS), Viacom (VIA), and Gannett (GCI), the last of which he likes the best. He believes a natural move for CBS would be to go private later on as Sumner Redston ages. He also believes Redstone could push VIA private as well. Of the two, Rogers says VIA is cheaper and has solid upside. On GCI, Rogers argues that despite the unpopular print media business, he has been buying on the way down. In a sense, this is an economic recovery play as ad sales pick up.

Doug Silverman of Senator Investment Group: Possibly the most telling information from Silverman's presentation was the fact that they had previously focused on credit the past few years but are now focused on value equities. In terms of specific recommendations, Senator likes rental car companies at present. He referenced the bidding war for Dollar Thrifty (DTG) and sees consolidation in the space. Senator owns 6% of Avis Budget (CAR) and then a lot of Hertz (HTZ) shares as well. You can read his detailed thoughts below.


Numerous other speakers presented at the Invest For Kids Conference and we highly recommend reading the full set of notes attached. Embedded below are the notes, courtesy of Simoleon Sense:



You can download a .pdf copy here.

Overall the second annual conference was a resounding success, raising over $1 million to benefit local children. And, the various hedge fund managers that spoke presented some interesting investment ideas.

John Burbank's Passport Capital Likes Natural Resources (Portfolio & Investor Letter)

John Burbank's hedge fund firm Passport Capital is out with their May performance update and first quarter investor letter. Per the documents, we see that Passport now manages $3 billion and their Global Strategy Fund was up 0.6% for May in a month where the market indices tumbled 8%. Overall, they fared much better than other hedge funds who were down big. Year to date for 2010, Passport is up 5.1%. Since inception, Burbank's fund has returned an impressive 23.6% annualized. Those returns, however, do come with some wild volatility. Passport Global was up 219.7% in 2007 and down 50.9% in 2008. Still though, if you can stomach the ride, the cumulative body of work is hard to argue with. Note that John Burbank will be presenting investment ideas at the upcoming Value Investing Congress and we've secured over a 40% discount for Market Folly readers here.

Turning to Passport's most recent exposure levels, we see they're overall 93% long and -44% short. This gives them 49% net long exposure and it's certainly much higher than what we've seen from other hedge funds. The vast majority of funds have had very low net long exposure. This is even more surprising when you consider that Passport had high exposure yet still managed to generate a positive return in a month where the markets were down severely. Burbank did note that this increase in exposure is not a shift in their market outlook, but rather due to appreciation of their basic materials positions.

Here are John Burbank's top 10 public longs:

1. Riversdale Mining (AU:RIV)
2. Apple Computer (AAPL)
3. Financial Technologies (IS: FTECH)
4. McKesson (MCK)
5. Teva Pharmaceutical (TEVA)
6. Labrador Iron Mines (CN:LIM)
7. CF Industries (CF)
8. Pantaloon (IS:PF)
9. TIG Holding Ltd (BZ:TARP)
10. Jordan Phosphate Mines (JR:JOPH)

As you can see, they have a lot of international exposure and also favor natural resource plays. Of their equity holdings though, two look very familiar: Teva Pharmaceutical and Apple. These two are some of the most widely held stocks amongst hedge funds. Embedded below is the May performance attribution sheet from Passport Capital:



You can download a .pdf copy here.

Additionally, in Burbank's first quarter letter to investors, he hones in on Passport's current strategy: betting on natural resources that China is structurally short. He touches on their thesis for Riversdale, their largest position and one they have owned for three years (traded in Australia). Burbank cites rising merger activity in the sector and rising coking coal prices. Passport owns around 14% of the company.

Turning to their position in Teva Pharmaceutical, Burbank cites increased opportunity in the health care sector due to reform. Passport believes the winners due to these changes will be pharmaceutical players, and diagnostics sectors. They also like pharmaceutical benefit managers (PBMs) and pharmaceutical distributors, thus reflected in their McKesson position. We've seen many other hedge funds bullish on the PBM sector as Andreas Halvorsen's Viking Global bets on Express Scripts (ESRX) and Lee Ainslie's Maverick Capital had been bullish on CVS Caremark (CVS).

Turning back to non-equity positions, keep in mind that Burbank's Passport owns physical gold as well. Embedded below is Passport Capital's first quarter letter to investors and we recommend reading it in its entirety for Burbank's in-depth explanation of some of their natural resource related bets:



You can download a .pdf copy here.

That about wraps up this comprehensive update on one of the more successful macro funds over the last decade. Keep in mind you can receive investment ideas directly from John Burbank and many other prominent hedge fund managers at the upcoming Value Investing Congress (receive a discount here).