Several hedge funds were hurt after Amazon.com announced its deal to buy online pharmacy PillPack, with the holdings of Larry Robbins’ Glenview Capital Management possibly being hit the hardest.
The June 28 announcement of the merger agreement rocked the stocks of drug retailers and distributors as investors dumped their shares on fears of an industry price war. The stocks of at least six companies fell sharply in price, including McKesson Corp., Walgreens Boots Alliance, and CVS Health.
Glenview Capital Management, a health-care heavy hedge fund, has big bets on at least three of the drug retailers or distributors and smaller bets on others. At the end of the first quarter, distributor McKesson was Glenview’s seventh largest U.S. long, while retail pharmacies Walgreens Boots Alliance and CVS Health were its ninth and thirteenth largest longs, respectively.
Shares of McKesson and CVS Health each fell about six percent on June 28, while Walgreens was down about 10 percent. Glenview also had a position in distributor Cardinal Health, which declined about 5 percent that same day. The companies continued their slide Friday, except for Walgreens, which rose less than 1 percent.
One of Robbins’ hedge funds, Glenview Capital Partners, was down more than 5 percent through April, according to HSBC. However, the firm is said to be up 1.73 percent this year through mid-June, according to an individual familiar with its performance. Glenview declined to comment.
Several other hedge funds have less exposure to the group of stocks that fell on news of Amazon's online pharmacy deal.
For example, Seth Klarman’s The Baupost Group has positions in each of the three largest drug distributors. Its most prominent investment is in Cardinal, the hedge fund firm’s eleventh largest long position in U.S. common stocks. Baupost also has stakes in AmerisourceBergen and McKesson. AmerisourceBergen dropped about 4 percent on June 28, falling a further 1 percent on Friday.
In the first quarter, O. Andreas Halvorsen’s Viking Global Investors took a new stake in CVS. However, it is a relatively minor share of the Tiger Cub’s overall long portfolio.
Meanwhile, Jonathon Jacobson’s Highfields Capital Management is the fourth largest shareholder of drug retailer Rite Aid Corp., whose shares fell about 11 percent June 28. However, the stock is not a significant part of the hedge fund firm’s portfolio. Rite Aid's stock fell a further 1.7 percent Friday.
None of the three largest retailers and three largest distributors ranked among the most popular hedge fund stocks at the end of the first quarter. The most widely held stock in this group among hedge funds was CVS, ranked just number 58, according to Novus.
At the end of the first quarter, CVS had 113 hedge fund owners, according to Novus. Of that, 23 were new investors in the period. During the same quarter, 20 hedge funds fully exited the company.
Walgreens had 93 hedge fund investors at the end of the first quarter, 22 of which were new investors. Plus, 20 hedge funds added to their positions in the company. During the period, 13 hedge funds fully exited Walgreens.
