Health care stocks were on a tear Monday, thanks to merger mania in the health insurance industry. Many other health care subsectors have been surging all year.
Some of the biggest beneficiaries of this mania are hedge funds.
As we earlier reported, entering the second quarter, health care represented about 26 percent of the total gross exposure of O. Andreas Halvorsen’s Greenwich, Connecticut–based Viking Global Investors’ long-short fund — Viking Global Equities — and 28 percent of Viking Long Fund. It also represented 34 percent of the long-short fund’s net exposure.
Health care was the largest profit contributor in both funds in the first quarter.
In 2014 health care was Viking Long Fund’s top-performing sector in the fourth quarter and the best performer for both Viking Long and Viking Global for all of 2014.
Health care stocks accounted for four of the firm’s five largest holdings at the end of the first quarter. They included Actavis, which recently acquired Allergan and subsequently said it would adopt its target’s name. Actavis shares were up about 1.6 percent on Monday.
Illumina, which provides DNA sequencing and array-based solutions for genetic analysis, was up nearly 1 percent on Monday and 19 percent for the quarter.
Drugmaker AstraZeneca, Viking’s fourth-largest holding at the beginning of the quarter, was also up nearly 1 percent Monday but is down slightly for the quarter.
Drugstore chain Walgreens Boots Alliance was down for the day but up nearly 4 percent for the quarter.
Viking Global Equities rose 2.2 percent last month and is up 5.5 percent for the year.
Larry Robbins’s Glenview Capital Management is also heavily tilted toward health care. In the first quarter, health care stocks accounted for most of the gross gains posted by Glenview Capital Opportunity funds’ long portfolios, which ranged between 9.7 percent and 10.2 percent.
Health insurer Anthem, the New York firm’s fifth-largest holding, was up 3.6 percent on Monday alone on reports it wants to acquire health insurer Cigna. The stock is up more than 11 percent for the quarter.
For-profit hospital chain Tenet Healthcare Corp., which recently completed several transactions, was down on Monday but is up more than 5 percent for the quarter. Tenet was Glenview’s seventh-largest holding.
Another likely beneficiary figures to be Jacob Gottlieb’s New York–based Visium Asset Management, whose $4.1 billion Visium Balanced Fund is a long-short equity fund focused solely on the health care industry.
Two of Visium’s eight largest longs firmwide are health care insurers whose stocks surged Monday — Anthem, up 3.6 percent, and Cigna, up about 4.7 percent.
Visium’s largest holding at the beginning of the quarter was Watson Pharmaceuticals, which was subsequently acquired by Actavis.
In addition, on Monday, Visium disclosed in a regulatory filing that it established a stake of more than 5 million shares in Axovant Sciences, a clinical-stage biopharmaceutical company. Its stock surged 3.6 percent on the day.
We also recently reported that at the end of the first quarter, Mark Kingdon’s Kingdon Capital Management had a 15 percent net exposure to the health care sector, which along with cyclicals was the largest bet in its portfolio, according to the New York firm’s first-quarter letter.
Benjamin Gambill’s New York–based Tiger Eye Capital had 11.4 percent of its assets in health care at the end of the first quarter.
