The
Vanguard Health Care Fund (Trades, Portfolio) recently released its portfolio updates for the first quarter of 2021, which ended on March 31.
Founded in 1984, the fund has been investing globally in health care-related stocks with the aim of long-term capital appreciation for over 30 years. Portfolio manager Jean Hynes, who has been advising the fund since 2008, chooses stocks based primarily on balance sheet strength, good management teams and product pipelines that show high potential for consistent profitability and growth.
Based on its investing criteria, the fund’s biggest sells for the quarter were Abbott Laboratories (ABT, Financial) and Thermo Fisher Scientific Inc. (TMO, Financial), while its most notable buys were Astellas Pharma Inc. (TSE:4503, Financial) and Baxter International Inc. (BAX, Financial).
Abbott Laboratories
The firm reduced its position in Abbott Laboratories (ABT, Financial) by 5,211,785 shares, or 39.78%, leaving a remaining holding of 7,891,253 shares. The trade had a -1.19% impact on the equity portfolio. During the quarter, shares traded for an average price of $118.64.
Headquartered in Chicago, Abbot Laboratories is a global medical devices and health care company specializing in diagnostics, diabetes, cardiovascular and neuromodulation products. It is also well-known for its nutrition brands, which include Pedialyte, Ensure, Glucerna and Similac.
On June 1, shares of Abbot Laboratories traded around $106.82 for a market cap of $189.87 billion and a price-earnings ratio of 33.52. According to the GuruFocus Value chart, the stock is fairly valued.
The company has a financial strength rating of 6 out of 10 and a profitability rating of 7 out of 10. The cash-debt ratio of 0.45 is lower than 81% of industry peers, but the Piotroski F-Score of 6 out of 9 suggests the company’s financial situation is healthy. The return on invested capital has surpassed the weighted average cost of capital in recent years, indicating the company is creating value.
Thermo Fisher Scientific
The firm also cut its investment in Thermo Fisher Scientific (TMO, Financial) by 601,919 shares, or 20.53%, for a remaining holding of 2,330,249 shares. The trade had a -0.59% impact on the equity portfolio. Shares traded for an average price of $477.79 during the quarter.
Thermo Fischer is a medical diagnostics and research company headquartered in Waltham, Massachusetts. It provides scientific instruments, reagents and consumables, as well as software and services, to the fields of health care, life sciences, government, industry and academia.
On June 1, shares of Thermo Fischer traded around $448.99 for a market cap of $176.61 billion and a price-earnings ratio of 22.62. According to the GF Value chart, the stock is fairly valued.
The company has a financial strength rating of 6 out of 10 and a profitability rating of 9 out of 10. The Altman Z-Score of 5.46 and interest coverage ratio of 18.14 suggest the company is able to easily continue making the payments on its debt. The three-year revenue growth rate is 15.4%, while the three-year Ebitda growth rate is 25.9%.
Astellas Pharma
The firm upped its stake in Astellas Pharma (TSE:4503, Financial) by 20,780,760 shares, or 54.2%, for a total holding of 59,120,200 shares. The trade had a 0.69% impact on the equity portfolio. During the quarter, shares traded for an average price of 1,733.55 Japanese yen ($15.85).
Astellas Pharma is a Japanese multinational pharmaceutical company aiming to create innovative products for unmet medical needs. Its products are focused primarily on cariology, immunology, infections diseases and oncology.
On June 1, shares of Astellas Pharma traded around 1,793.50 yen for a market cap of 3.01 trillion yen. According to the GF Value chart, the stock is fairly valued.
The company has a financial strength rating of 8 out of 10 and a profitability rating of 8 out of 10. The Piotroski F-Score of 6 out of 9 and Altman Z-Score of 3.53 both show the company is not likely to face liquidity issues. The ROIC is consistently higher than the WACC, indicating the company is creating value as it grows.
Baxter International
The firm also added 2,558,251 shares, or 37.34%, to its investment in Baxter International (BAX, Financial) for a total of 9,409,080 shares. The trade had a 0.46% impact on the equity portfolio. Shares traded for an average price of $79.39 during the quarter.
Based in Deerfield, Illinois, Baxter International is a health care company that primarily focuses on products to treat hemophilia, kidney disease, immune disorders and other chronic and acute medical conditions. It is perhaps best known as a leading producer of IV fluids and systems.
On June 1, shares of Baxter International traded around $82.51 for a market cap of $41.49 billion and a price-earnings ratio of 39.66. According to the GF Value chart, the stock is fairly valued.
The company has a financial strength rating of 6 out of 10 and a profitability rating of 7 out of 10. The cash-debt ratio of 0.49 is lower than 80% of industry peers, but the Altman Z-Score of 4.58 shows the company is not at risk of bankruptcy. The three-year revenue growth rate is 5.8%, while the three-year Ebitda growth rate is 8.0%.
Portfolio overview
As of the quarter’s end, the fund held shares in 104 common stocks valued at a total of $46.53 billion. The fund added 18 new positions to the equity portfolio, sold out of eight stocks and added to or reduced several other positions for a turnover of 5%.
The top holdings were UnitedHealth Group Inc. (UNH, Financial) with 6.29% of the equity portfolio, Pfizer Inc. (PFE, Financial) with 5.8% and AstraZeneca PLC (LSE:AZN, Financial) with 5.16%.
Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Portfolio updates reflect only common stock positions as per the regulatory filings for the quarter in question and may not include changes made after the quarter ended.
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