BlackRock, the world's largest asset manager, is placing big bets on healthcare stocks. The giant New York money manager, which oversees more than $4.5 trillion in assets, took large positions last year in at least 14 investor-owned healthcare companies ranging from Tenet Healthcare Corp. and TeamHealth on the provider side to insurer Centene Corp. and a host of medical-device and equipment companies.
BlackRock's new ownership stakes were revealed last month in its 13G filings with the U.S. Securities and Exchange Commission. The filings are triggered at year-end when an investor owns 5% or more of a company's common shares.
Based on BlackRock's filings, Modern Healthcare estimates that BlackRock and its subsidiary funds invested hundreds of millions of dollars in the common shares of the 14 companies throughout 2015, including the fourth quarter. As of Dec. 31, BlackRock's holdings in those companies totaled more than $9.6 billion in value.
For several of the companies, including medical-device firm Stryker Corp. and dialysis chain DaVita HealthCare Partners, BlackRock broke the 5% ownership threshold. For others, BlackRock already owned at least 5% and was building its investment further.
BlackRock does not comment on individual stocks or holdings, spokeswoman Olivia Offner said, adding the firm also declined to comment on the analysis.
Its plays don't necessarily signal that it intends to use its enhanced ownership in any of the companies to encourage governance or operational changes. Analysts said BlackRock probably just sees value in the sector's slumping stocks, which they view as a good sign for the companies.
Several of the 14 healthcare stocks saw their prices fall during the summer and autumn. Tenet and others saw their earnings plunge because of flattening insurance exchange volumes and general nervousness around the Affordable Care Act. Other economic factors, such as China's struggles, depressed U.S. stocks.
Centene was among the four insurers on the list.
“It sounds like BlackRock was astutely taking advantage of weakness in the stock to own a greater percentage of the company,” said Brian Wright, a healthcare analyst at Sterne Agee CRT. The Medicaid managed-care company—on the verge of closing its $6.8 billion merger with Health Net, another company in which BlackRock has more than a 5% stake—saw its stock drop to less than $53 a share in September after topping $81 in June.
At a gathering last month of Wall Street analysts hosted by the Nashville Health Care Council, Frank Morgan of RBC Capital Markets said that healthcare stocks had been oversold and that investors would soon start buying and put a floor under share prices.
BlackRock is on the radar of nearly every CEO leading a major American corporation. The asset manager is one of the five largest shareholders of such giants as Apple, Facebook and Google.
Its CEO, Larry Fink, is a major player on Wall Street, and he's been vocal in telling the chief executives of Standard & Poor's 500 companies to invest in their people and other assets rather than trying to boost share prices with quickie tactics such as stock buybacks. “The effects of the short-termist phenomenon are troubling both to those seeking to save for long-term goals such as retirement and for our broader economy,” Fink wrote in April in an open letter to the CEOs.
But senior managers at the 14 healthcare companies can't be blamed if BlackRock's stock-shopping spree makes them a little nervous. While most 13G disclosures like the ones signaling BlackRock's rising healthcare holdings don't lead to activist behavior, 13Ds do.
In January, Tenet's board of directors created two board seats for Glenview Capital Management when the hedge fund accumulated an 18% stake in the hospital chain, according to a 13D regulatory filing. Glenview and Tenet say the developments are friendly and helpful to raising shareholder value at Tenet. But Glenview's influence could become more activist. After a year, Glenview could gain two additional Tenet board seats if it keeps its holding above 10%.
Last quarter, BlackRock raised its stake in Tenet to 8.8%.
