The Eaton Vance Worldwide Health Sciences Fund (Trades, Portfolio) disclosed its portfolio for the fourth quarter of 2021 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 are expected to grow in value over time.
The fund added two new holdings to the portfolio during the three months ended Nov. 30, divested of four stocks and added to or trimmed a number of other existing positions. Eaton Vance’s most notable trades included a new position in Veeva Systems Inc. (VEEV, Financial), the sale of Medtronic PLC (MDT, Financial), boosts to its Abbott Laboratories (ABT, Financial) and Bristol-Myers Squibb Inc. (BMY, Financial) investments and a reduction in the Merck & Co. Inc. (MRK, Financial) holding.
Veeva Systems
Eaton Vance invested in 46,863 shares of Veeva Systems (VEEV, Financial), allocating 1.17% of the equity portfolio to the holding. The stock traded for an average price of $305.02 per share during the quarter.
The Pleasanton, California-based company, which provides cloud-based software solutions for the pharmaceutical and life sciences industries, has a $33.06 billion market cap; its shares were trading around $215.03 on Friday with a price-earnings ratio of 79.02, a price-book ratio of 11.71 and a price-sales ratio of 20.11.
The GF Value Line suggests the stock is significantly undervalued currently based on historical ratios, past performance and future earnings projections.
GuruFocus rated Veeva’s financial strength 7 out of 10, driven by a comfortable level of interest coverage and a robust Altman Z-Score of 35.54 that indicates it is in good standing. It may be becoming less efficient, however, since assets are building up at a faster rate than revenue is growing. The return on invested capital also overshadows the weighted average cost of capital, meaning value is being created as the company grows.
The company’s profitability fared even better with a 9 out of 10 rating. In addition to operating margin expansion, Veeva is supported by returns on equity, assets and capital that outperform a majority of competitors. It also has a moderate Piotroski F-Score of 6 out of 9, indicating conditions are typical for a stable company. Consistent earnings and revenue growth contributed to a predictability rank of three out of five stars. According to GuruFocus, companies with this rank return an average of 8.2% annually over a 10-year period.
Of the gurus invested in Veeva Systems, Ron Baron (Trades, Portfolio) has the largest position with 0.54% of its outstanding shares. Catherine Wood (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Ray Dalio (Trades, Portfolio), Jerome Dodson (Trades, Portfolio) and Baille Gifford, among others, also own the stock.
Medtronic
With an impact of 3.76% on the equity portfolio, the fund dumped its remaining 336,513 shares of Medtronic (MDT, Financial). Shares traded for an average price of $124.22 each during the quarter.
GuruFocus estimates Eaton Vance gained 4.88% on the investment since establishing it in the second quarter of 2018. It was previously the fund’s eighth-largest holding.
The Irish medical device manufacturer with headquarters in Minneapolis, which produces pacemakers, defibrillators, heart valves and other devices, has a market cap of $136.85 billion; its shares were trading around $101.55 on Friday with a price-earnings ratio of 29.33, a price-book ratio of 2.64 and a price-sales ratio of 4.35.
According to the GF Value Line, the stock is modestly undervalued currently.
Medtronic’s financial strength was rated 5 out of 10 by GuruFocus. In addition to adequate interest coverage, the company has a high Altman Z-Score of 3.29. The ROIC also eclipses the WACC, so value is being created.
The company’s profitability scored a 7 out of 10 rating. Although the operating margin is in decline, it is supported by strong returns that top a majority of industry peers, a high Piotroski F-Score of 8, indicating business conditions are healthy, and a one-star predictability rank. GuruFocus says companies with this rank return an average of 1.1% annually.
With a 0.34% stake, Dodge & Cox is Medtronic’s largest guru shareholder. Other top guru investors include Diamond Hill Capital (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Hotchkis & Wiley, Mairs and Power (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, Ken Fisher (Trades, Portfolio), the T Rowe Price Equity Income Fund (Trades, Portfolio) and PRIMECAP Management (Trades, Portfolio).
Abbott Laboratories
With an impact of 1.95% on the equity portfolio, Eaton Vance boosted its position in Abbott Laboratories (ABT, Financial) by 70.26%, buying 133,209 shares. It now holds a total of 322,792 shares. During the quarter, the stock traded for an average per-share price of $124.66.
Representing 3.58% of total assets managed, Abbott Labs is the fund’s 10-largest holding. GuruFocus estimates the fund has gained 47.71% on the investment since establishing it in the first quarter of 2018.
The Chicago-based medical device company, which manufactures pacemakers, implantable cardiovascular defibrillators, stents, catheters and other equipment, has a $217.75 billion market cap; its shares were trading around $123.20 on Friday with a price-earnings ratio of 31.25, a price-book ratio of 6.33 and a price-sales ratio of 5.11.
Based on the GF Value, the stock appears to be fairly valued currently.
GuruFocus rated Abbott’s financial strength 6 out of 10, driven by adequate interest coverage and a high Altman Z-Score of 4.98. Assets are building up at a faster rate than revenue is growing, however, suggesting it is becoming less efficient. The ROIC exceeds the WACC, indicating good value creation is occurring.
The company’s profitability scored a 7 out of 10 rating on the back of an expanding operating margin, strong returns that outperform a majority of competitors and a high Piotroski F-Score of 8. Abbott Labs also has a one-star predictability rank.
Fisher is the company’s largest guru shareholder with a 0.47% stake. Diamond Hill, PRIMECAP, the Vanguard Health Care Fund (Trades, Portfolio), Dalio, Grantham, Mairs and Power (Trades, Portfolio), and the MS Global Franchise Portfolio (Trades, Portfolio) also have significant positions in Abbott Laboratories.
Bristol-Myers Squibb
Impacting the equity portfolio by 1.32%, the Worldwide Health Sciences Fund increased its holding of Bristol-Myers Squibb (BMY, Financial) by 279,604 shares, or 160.51%. It now holds 453,800 shares total. During the quarter, the stock traded for an average price of $59.61 per share.
Accounting for 2.15% of total assets managed, GuruFocus says the fund has gained an estimated 1.77% on the investment since the second quarter of 2019.
The pharmaceutical company, which is headquartered in New York City, has a market cap of $142.96 billion; its shares were trading around $64.38 on Friday with a forward price-earnings ratio of 8.05, a price-book ratio of 3.85 and a price-sales ratio of 3.19.
The GF Value Line suggests the stock is modestly undervalued currently.
Bristol-Myers Squibb’s financial strength was rated 4 out of 10 by GuruFocus. As a result of the company issuing approximately $15.6 billion in new long-term debt over the past three years, it has weak interest coverage. The Altman Z-Score of 1.87 warns the company could be at risk of going bankrupt since its assets are building up at a faster rate than revenue is growing. The ROIC surpasses the WACC by a slim margin currently, so value is being created.
The company’s profitability fared much better, scoring a 7 out of 10 rating. In addition to a declining operating margin, Bristol-Myers Squibb is being weighed down by negative returns that underperform over half of its industry peers. It is supported by a moderate Piotroski F-Score of 4, but the one-star predictability rank is on watch as a result of losses in operating income.
Of the gurus invested in Bristol-Myers Squibb, Dodge & Cox has the largest stake with 1.28% of its outstanding shares. The stock is also held by Vanguard, PRIMECAP, Simons’ firm, Andreas Halvorsen (Trades, Portfolio), Hotchkis & Wiley and Richard Pzena (Trades, Portfolio), among others.
Merck
The fund reduced its Merck (MRK, Financial) position by 48.5%, selling 216,432 shares. The transaction impacted the equity portfolio by -1.38%. Shares traded for an average price of $79.33 each during the quarter.
It now holds 229,777 shares, which make up 1.52% of the equity portfolio. GuruFocus estimates the fund has gained 29.87% on the long-held investment.
The pharmaceutical company, which is headquartered in Kenilworth, New Jersey, has a $203.46 billion market cap; its shares were trading around $80.43 on Friday with a price-earnings ratio of 28.47, a price-book ratio of 5.7 and a price-sales ratio of 3.78.
According to the GF Value Line, the stock is fairly valued currently.
GuruFocus rated Merck’s financial strength 5 out of 10. Although the company has issued new long-term debt in recent years, it is still at a manageable level due to sufficient interest coverage The Altman Z-Score of 3.98 also indicates the company is in good standing. Value creation is occurring as the ROIC is above the WACC.
The company’s profitability scored an 8 out of 10 rating, driven by operating margin expansion, strong returns that top a majority of competitors and a high Piotroski F-Score of 7. The one-star predictability rank is on watch.
With 0.42% of Merck’s outstanding shares, Fisher is the largest guru shareholder. Barrow, Hanley, Mewhinney & Strauss, Grantham, Steven Cohen (Trades, Portfolio), the Parnassus Endeavor Fund (Trades, Portfolio), the T Rowe Price Equity Income Fund (Trades, Portfolio), the Smead Value Fund (Trades, Portfolio), Simons’ firm and Charles Brandes (Trades, Portfolio) also have large positions in the stock.
Additional trades and portfolio performance
The other new holding the Worldwide Health Sciences Fund established during the quarter was AptarGroup Inc. (ATR, Financial). It also added to Roche Holding AG (XSWX:ROG, Financial), trimmed the Novartis AG (XSWX:NOVN, Financial) position and sold out of the iShares Global Healthcare ETF (IXJ, Financial).
Eaton Vance’s $1.13 billion equity portfolio, which is composed of 52 stocks, is largely invested in the drug manufacturing industry with a weight of 41.76%.
The fund returned 22.06% in fiscal 2021, outperforming the MSCI World Health Care Index’s 19.8% return.
