When you think of the Tiger Cub crowd, you naturally figure their funds are loaded up with technology, Internet and media stocks.
However, that’s not the case for all the Tiger Cubs. In the case of O. Andreas Halvorsen’s Viking Global Investors, health care stocks are playing an outsize role.
As we earlier reported, Viking Global Equities, the hedge fund firm’s long-short fund, was up 4.8 percent in the first quarter, while Viking Long Fund surged 6.5 percent.
The Greenwich, Connecticut, firm’s three best-performing longs were all health care stocks: pharmaceutical companies Valeant Pharmaceuticals International and Actavis, and global drugstore chain Walgreens Boots Alliance.
“Health care was the largest profit contributor in both funds during the quarter,” Halvorsen said in the firm’s first-quarter letter, dated April 27 and obtained by Alpha.
In 2014 health care was Viking Long Fund’s top-performing sector in the fourth quarter and the best for both Viking Long and Viking Global for 2014. At the start of this year, health care accounted for nearly one-third of Viking’s long portfolio.
Entering the second quarter, the sector still represented Viking’s biggest bet. The sector accounts for 26 percent of Viking Global’s total gross exposure and 28 percent of Viking Long’s gross exposure. It also represents 34 percent of the long-short fund’s net exposure. No other sector comes close to health care’s net exposure in the two funds.
Of the 28 percent gross exposure for Viking Long, most is invested in pharmaceuticals and biotech stocks. A small portion of the health care bet is on equipment and services.
Even so, Halvorsen stressed that he is not making a big speculative bet on the industry. “This relatively high sector concentration is mitigated by the diversity in the companies’ fundamentals and their different shareholder base,” he said in the letter.
Viking’s largest position at the end of the first quarter is Actavis, the Irish drugmaker that acquired Allergan after the botox maker spurned a hostile offer from Valeant last year. Actavis accounts for 5.5 percent of Viking Global’s assets and 5.8 percent of Viking Long’s.
Illumina, which develops tools for gene sequencing, is the second-largest long, drugmaker AstraZeneca is the fourthlargest long, and Walgreens is the fifth.
Illumina, which was Viking’s largest long position entering the year, and Walgreens were two of its best-performing longs in 2014.
