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Eaton Vance Worldwide Health Sciences Fund Buys 2 Stocks

The Eaton Vance Worldwide Health Sciences Fund (Trades, Portfolio) disclosed last week it established two new positions during the third quarter.


Managed by Jason Kritzer and Samantha Pandolfi, the Boston-based fund invests heavily in the health care space. The portfolio managers look around the world for securities that are not only reasonably priced, but which they believe will grow in value over time.

Based on these criteria, the fund opened positions in Amgen Inc. (NASDAQ:AMGN) and CVS Health Corp. (NYSE:CVS) during the quarter.

Amgen

Having previously exited a position in Amgen in the third quarter of 2016, the fund entered a new 120,009-share holding, giving it 2.54% space in the equity portfolio. The stock traded for an average price of $186.06 per share during the quarter.

The Thousand Oaks, California-based biopharmaceutical company has a $129.5 billion market cap; its shares were trading around $217.95 on Monday with a price-earnings ratio of 16.73, a price-book ratio of 12.01 and a price-sales ratio of 5.77.

The Peter Lynch chart shows the stock is trading slightly above its fair value, suggesting it is overpriced.

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GuruFocus rated Amgen's financial strength 4 out of 10. Although the company has sufficient interest coverage, its Sloan ratio indicates it has poor earnings quality. In addition, the Altman Z-Score of 2.52 implies it is under some financial pressure.

The company's profitability fared much better, scoring a 9 out of 10 rating on the back of an expanding operating margin, strong returns that outperform a majority of competitors, consistent earnings and revenue growth and a moderate Piotroski F-Score of 6, which suggests business conditions are stable. It also has a business predictability rank of 3.5 out of five stars. According to GuruFocus, companies with this rank typically see their stocks gain an average of 9.3% per annum over a 10-year period.

Of the gurus invested in Amgen, PRIMECAP Management (Trades, Portfolio) has the largest stake with 3.11% of outstanding shares. Other top guru shareholders include Jim Simons (Trades, Portfolio)' Renaissance Technologies, Richard Pzena (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), the Smead Value Fund (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Richard Snow (Trades, Portfolio), Charles Brandes (Trades, Portfolio), Dodge & Cox, Mairs and Power (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Jeff Auxier (Trades, Portfolio), John Hussman (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Steven Cohen (Trades, Portfolio).

CVS Health

After divesting of CVS in the fourth quarter of 2016, the fund established a new 164,552-share holding, dedicating 1.02% of the equity portfolio to the position. Shares traded for an average price of $56.45 during the quarter.

The drugstore chain, which is headquartered in Woonsocket, Rhode Island, has a market cap of $88.29 billion; its shares were trading around $67.81 on Monday with a price-earnings ratio of 19.01, a price-book ratio of 1.44 and a price-sales ratio of 0.35.

According to the Peter Lynch chart, the stock is overvalued.

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CVS' financial strength was rated 4 out of 10 by GuruFocus on the back of a low cash-debt ratio and poor interest coverage. In addition, the Altman Z-Score of 1.78 warns the company could be at risk of going bankrupt.

The company's profitability scored an 8 out of 10 rating despite having declining margins, weak returns that underperform a majority of competitors and recording a slowdown in revenue per share growth over the past 12 months. CVS is also supported by a moderate Piotroski F-Score of 5 and a 4.5-star business predictability rank. GuruFocus says companies with this rank typically see their stocks gain an average of 10.6% per year.

With 1.6% of outstanding shares, Dodge & Cox is the company's largest guru shareholder. Barrow, Hanley, Mewhinney & Strauss, the Vanguard Health Care Fund (Trades, Portfolio), Bill Nygren (Trades, Portfolio), PRIMECAP, the T Rowe Price Equity Income Fund (Trades, Portfolio), Pioneer, Chris Davis (Trades, Portfolio), Greenblatt, Pzena, Brandes, Ray Dalio (Trades, Portfolio), Gabelli, Jerome Dodson (Trades, Portfolio), Diamond Hill Capital (Trades, Portfolio), Tom Gayner (Trades, Portfolio) and several other gurus also own the stock.

Additional trades

During the quarter, Eaton Vance also boosted a number of positions, including Roche Holding AG (XSWX:ROG), Sanofi SA (XPAR:SAN), AbbVie Inc. (NYSE:ABBV), the iShares Global Helathcare Exchange-Traded Fund (IXJ), Agilent Technologies Inc. (NYSE:A) and Blueprint Medicines Corp. (NASDAQ:BPMC).

The fund's $985 million equity portfolio, which is composed of 56 stocks, is largely invested in the drug manufacturing industry with a weight of 43.53%.

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According to its fact sheet, the fund outperformed its benchmark in 2018 with a return of 5.98%. The MSCI World Health Care Index posted a 2.51% return.

Disclosure: No positions.

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This article first appeared on GuruFocus.