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Number Cruncher

Looking for turnaround plays in the health care sector Add to ...

What are we looking for?

What the pros are buying for their funds.

Checking their top holdings is a way to get stock tips or do research on the fund. We look at CI Global Health Sciences Corp. Class at ci.com.

More about the fund

The $120-million health care equity fund has been managed by Andrew Waight of Altrinsic Global Advisors LLC since 2000.

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The fund gained 29.9 per cent for the year ended Sept. 30.

Over 10 years, it has posted an average annual return of 7.7 per cent.

The manager owns a mix of growth and value stocks.

They include big drug companies to potential turnaround plays and firms trying to meet an unmet medical need.

Pharmaceutical stocks began rebounding last year as yield-hungry investors flocked to defensive sectors amid concerns about Europe’s debt crisis, he said.

These companies became more attractive as investors realized that patent expiration for their blockbuster drugs is nearing an end and there are signs they are starting to replenish their product pipelines.

Pharma stocks now trade at about 12 times forward earnings, and that’s cheap by historical standards, he said.

“I still see them as an opportunity, but not going back to [price-to-earnings] multiples in the 20s and low 30s.”

What did we find?

Most stocks alive and well.

Onyx Pharmaceuticals Inc. and Patheon Inc. have emerged this year as triple-digit winners.

BioMarin Pharmaceutical Inc., which focuses on drugs to treat rare diseases, still has more upside after climbing about 25 per cent this year, Mr. Waight said.

“The market it serves is small, but very profitable. It has also managed to reduce the time to market [for their drugs].” His one-year target is $57 (U.S.) a share.

Shares of HealthSouth Corp., once rocked by an accounting scandal, remains a top holding.

A new management team has been turning around the operator of rehabilitation hospitals, and is steering the firm into a growth phase, he said.

“They have actually started to buy back their preferred shares.” His one-year target is $30 a share.

Mr. Waight still likes medical device maker Boston Scientific Corp. as a turnaround play.

While the firm has suffered from management changes and problems with its 2006 acquisition of Guidant Corp., it is “throwing off about $1-billion in free cash flow a year,” he said.

He has a target of $8 a share on the stock.

 

Top holdings for CI Global Health Sciences Corp. Class at Sept. 30, 2012

Company Symbol 52 wk. high 52 wk. low
Celgene Corp. CELG-Q 81.24 58.53
BioMarin Pharmaceuticals BMRN-Q 44.18 30.06
Boston Scientific BSX-N 6.41 4.79
Covidien COV-N 60.81 41.69
Gilead Sciences GILD-Q 70.39 34.45
HealthSouth HLS-N 24.99 15.19
Merck & Company MRK-N 47.5 32.19
Novartis AG NVS-N 63.65 51.20
Onyx Pharmaceuticals ONXX-Q 93.18 33.40
Patheon Inc. PTI-T 3.82 1.08

Source: Globe Investor, CI Financial Corp.

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  • CELG-Q
  • BMRN-Q
  • BSX-N
  • COV-N
  • GILD-Q
  • HLS-N
  • MRK-N
  • NVS-N
  • ONXX-Q
  • PTI-T
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