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Top 5 Trades of the Eaton Vance Worldwide Health Sciences Fund

GuruFocus.com
·9 min read

- By Sydnee Gatewood

The Eaton Vance Worldwide Health Sciences Fund (Trades, Portfolio) disclosed its portfolio for the third quarter of the year earlier this week.


Managed by Jason Kritzer and Samantha Pandolfi, the fund, which is part of Boston-based Eaton Vance, 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.

Although the fund added six new holdings to the portfolio during the three months ended Aug. 31, its most notable trades included an addition to its AbbVie Inc. (NYSE:ABBV) position, a reduction in the Bristol-Myers Squibb Co. (NYSE:BMY) holding and sales of the Gilead Sciences Inc. (NASDAQ:GILD), Alexion Pharmaceuticals Inc. (NASDAQ:ALXN) and BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) stakes.

AbbVie

With an impact of 2.69% on the equity portfolio, Eaton Vance boosted its position in AbbVie by 327.49%, buying 300,113 shares. It now holds a total of 391,753 shares. The stock traded for an average price of $95.92 per share during the quarter.

Representing 3.51% of total assets managed, GuruFocus estimates the fund has gained 7.95% on the investment so far.

Top 5 Trades of the Eaton Vance Worldwide Health Sciences Fund
Top 5 Trades of the Eaton Vance Worldwide Health Sciences Fund

The Chicago-based biopharmaceutical company has a $142.69 billion market cap; its shares were trading around $82.70 on Wednesday with a price-earnings ratio of 17.2, a price-book ratio of 9.7 and a price-sales ratio of 3.41.

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

Top 5 Trades of the Eaton Vance Worldwide Health Sciences Fund
Top 5 Trades of the Eaton Vance Worldwide Health Sciences Fund

GuruFocus rated AbbVie's financial strength 3 out of 10. As a result of issuing approximately $29.5 billion in new long-term debt over the past three years, the company has poor interest coverage. The Altman Z-Score of 1.11 also warns that it could be in danger of going bankrupt since its assets are building up faster than revenue is growing.

The company's profitability fared much better with a 9 out of 10 rating. In addition to an expanding operating margin, AbbVie is supported by strong returns that outperform a majority of competitors as well as a moderate Piotrosk F-Score of 5, which indicates business conditions are stable. Despite recording a loss in operating income over the past three years, it also has a predictability rank of one out of five stars. According to GuruFocus, companies with this rank return an average of 1.1% annually over a 10-year period.

Of the many gurus invested in AbbVie, Jim Simons (Trades, Portfolio)' Renaissance Technologies has the largest stake with 1.08% of outstanding shares. Other top guru shareholders include Pioneer Investments (Trades, Portfolio), the T Rowe Price Equity Income Fund (Trades, Portfolio), Robert Bruce (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Tweedy Browne (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Ken Heebner (Trades, Portfolio) and Diamond Hill Capital (Trades, Portfolio).

Bristol-Myers Squibb

Impacting the equity portfolio by -0.88%, the Worldwide Health Sciences Fund trimmed its holding of Bristol-Myers Squibb by 152,768 shares, or -46.72%. It now holds 174,196 shares total. During the quarter, shares traded for an average price of $59.84 each.

Accounting for 1.01% of total assets managed, GuruFocus says the fund has gained approximately 0.30% on the investment since the second quarter of 2019.

Top 5 Trades of the Eaton Vance Worldwide Health Sciences Fund
Top 5 Trades of the Eaton Vance Worldwide Health Sciences Fund

The pharmaceutical company, which is headquartered in New York City, has a market cap of $129.94 billion; its shares were trading around $57.66 on Wednesday with a price-book ratio of 2.65 and a price-sales ratio of 3.38.

According to the Peter Lynch chart, the stock is overvalued. The GuruFocus valuation rank of 7 out of 10, however, indicates it is undervalued.

Top 5 Trades of the Eaton Vance Worldwide Health Sciences Fund
Top 5 Trades of the Eaton Vance Worldwide Health Sciences Fund

Bristol-Myers Squibb's financial strength was rated 5 out of 10 by GuruFocus. Since the company has issued approximately $16.8 billion in new long-term debt over the past three years, it has poor interest coverage. The Altman Z-Score of 1.82 aslo suggests it is under some pressure since its assets are building up at a faster rate than revenue is growing.

The company's profitability fared much better, scoring an 8 out of 10 rating. While it is being supported by an expanding operating margin, Bristol-Myers' negative returns underperform at least half of its industry peers. It also has a low Piotroski F-Score of 3, which indicates business conditions are in poor shape. The one-star predictability rank is also on watch.

With a 1.93% stake, Simons' firm is the company's largest guru shareholder. The Vanguard Health Care Fund (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Dodge & Cox, Pioneer, Richard Pzena (Trades, Portfolio), NWQ Managers (Trades, Portfolio) and Kahn Brothers (Trades, Portfolio) also have significant positions in the stock.

Gilead Sciences

The fund divested of its 210,785 remaining shares of Gilead Sciences, impacting the equity portfolio by -1.59%. The stock traded for an average per-share price of $72.99 during the quarter.

GuruFocus estimates the fund lost 22.58% on the investment.

Top 5 Trades of the Eaton Vance Worldwide Health Sciences Fund
Top 5 Trades of the Eaton Vance Worldwide Health Sciences Fund

The Foster City, California-based company, which specializes in developing antiviral drugs to treat HIV, hepatitis B and C and influenza, has a $73.04 billion market cap; its shares were trading around $58.38 on Wednesday with a price-book ratio of 4.05 and a price-sales ratio of 3.33.

Based on the Peter Lynch chart, the stock appears to be trading near its fair value. The GuruFocus valuation rank of 7 out of 10, however, suggests it is undervalued since the price-sales ratio is approaching a three-year low.

Top 5 Trades of the Eaton Vance Worldwide Health Sciences Fund
Top 5 Trades of the Eaton Vance Worldwide Health Sciences Fund

GuruFocus rated Gilead's financial strength 5 out of 10 on the back of insufficient interest coverage and an Altman Z-Score of 2.28 that indicates it is under some pressure.

The company's profitability scored an 8 out of 10 rating despite having declining margins and negative returns that underperform over half of its competitors. Gilead also has a moderate Piotroski F-Score of 5, but the one-star predictability rank is on watch as a result of revenue per share declining over the past three years.

Dodge & Cox is the company's largest guru shareholder with 1% of outstanding shares. Other top guru investors include Simons' firm, Pioneer, Diamond Hill, the T. Rowe Price Equity Income Fund and John Rogers (Trades, Portfolio).

Alexion Pharmaceuticals

Eaton Vance sold its remaining 78,210 shares of Alexion Pharmaceuticals, impacting the equity portfolio by -0.91%. During the quarter, the stock traded for an average price of $108.83 per share.

According to GuruFocus, the fund lost an estimated 16.49% on the investment.

Top 5 Trades of the Eaton Vance Worldwide Health Sciences Fund
Top 5 Trades of the Eaton Vance Worldwide Health Sciences Fund

Headquartered in Boston, the pharmaceutical company, which is known for its focus on treatments for rare diseases, has a market cap of $25.56 billion; its shares were trading around $116.61 on Wednesday with a price-earnings ratio of 31.19, a price-book ratio of 2.44 and a price-sales ratio of 4.69.

The Peter Lynch chart suggests the stock is overvalued. The GuruFocus valuation rank of 10 out of 10, however, favors undervaluation.

Top 5 Trades of the Eaton Vance Worldwide Health Sciences Fund
Top 5 Trades of the Eaton Vance Worldwide Health Sciences Fund

Alexion's financial strength was rated 7 out of 10 by GuruFocus on the back of adequate interest coverage and a high Altman Z-Score of 3.63 that indicates it is in good standing despite the fact assets are building up at a faster rate than revenue is growing.

The company's profitability scored a 9 out of 10 rating, driven by an expanding operating margin, strong returns that outperform a majority of industry peers and a high Piotroski F-Score of 7, which indicates business conditions are healthy. Despite recording consistent earnings and revenue growth, Alexion's three-star predictability rank is on watch. GuruFocus says companies with this rank return an average of 8.2% annually.

With a 2.04% stake, Simons' firm is Alexion's largest guru shareholder. Pioneer, Cohen, David Carlson (Trades, Portfolio), Greenblatt, Ken Fisher (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Lee Ainslie (Trades, Portfolio), John Hussman (Trades, Portfolio) and Pzena also own the stock.

BioMarin Pharmaceutical

With an impact of -0.78% on the equity portfolio, Eaton Vance dumped its 75,515 remaining shares of BioMarin. Shares traded for an average price of $113.48 each during the quarter.

GuruFocus data shows the fund gained an estimated 11.24% on the investment since establishing it in the second quarter of 2016.

Top 5 Trades of the Eaton Vance Worldwide Health Sciences Fund
Top 5 Trades of the Eaton Vance Worldwide Health Sciences Fund

The San Rafael, California-based company, which specializes in enzyme replacement therapies, has a $13.69 billion market cap; its shares were trading around $75.56 on Wednesday with a price-earnings ratio of 114.41, a price-book ratio of 4.22 and a price-sales ratio of 7.51, which GuruFocus noted are near multiyear lows.

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

Top 5 Trades of the Eaton Vance Worldwide Health Sciences Fund
Top 5 Trades of the Eaton Vance Worldwide Health Sciences Fund

BioMarin's financial strength was rated 6 out of 10 by GuruFocus. Although the company's assets are building up at a faster rate than revenue is growing, the Altman Z-Score of 4.39 suggests it is in good standing.

The company's profitability did not fare as well, scoring a 3 out of 10 rating despite being supported by an expanding operating margin and returns that outperform a majority of competitors. BioMarin also has a moderate Piotroski F-Score of 5 and a one-star predictability rank.

PRIMECAP is the company's largest guru shareholder with a 10.03% stake. Other guru investors are Dodge & Cox, Spiros Segalas (Trades, Portfolio), Carlson, Pioneer, Stanley Druckenmiller (Trades, Portfolio), Jerome Dodson (Trades, Portfolio) and Greenblatt.

Additional trades and portfolio performance

New holdings the Worldwide Health Sciences Fund established during the quarter were in R1 RCM Inc. (NASDAQ:RCM), Accolade Inc. (NASDAQ:ACCD), ICU Medical Inc. (NASDAQ:ICUI), Royalty Pharma PLC (NASDAQ:RPRX), Immunovant Inc. (NASDAQ:IMVT) and Phreesia Inc. (PHR).

Eaton Vance's $1.07 billion equity portfolio, which is composed of 59 stocks, is largely invested in the drug manufacturing industry with a weight of 39.71%.

Top 5 Trades of the Eaton Vance Worldwide Health Sciences Fund
Top 5 Trades of the Eaton Vance Worldwide Health Sciences Fund

According to its annual shareholder letter, the fund returned 21.74% for its fiscal 2020 year, which ended Aug. 31.

Disclosure: No positions.

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This article first appeared on GuruFocus.