Glenview’s Bullish Call on Health Care Is Playing Out So Far

(Bloomberg) -- Earlier this year, Glenview Capital Management founder Larry Robbins told investors they were wrong to fear Medicare for All proposals as he boosted his stake in health-care holdings, which were under pressure from political headlines.

So far, his call is playing out well.

Shares of managed-care companies and hospitals, which account for some of Glenview’s top holdings, surged on Friday, pushing the S&P 500 Health index to an all-time high after Senator Elizabeth Warren released a revised plan to overhaul the sector, if elected president. The proposal, seen as a “significant change in tone,” was a major concession to the difficulty of pushing “too much change too quickly,” Barclays analyst Steve Valiquette wrote in a note to clients.

Providers extended gains on Monday with the S&P 500 Managed Care index touching its highest level of the year. The benchmark has risen 26% so far this quarter and is on pace for its largest quarterly gain since 2000, according to data compiled by Bloomberg.

“In short, if you were worried an Elizabeth Warren victory could lead to a major MFA fight in her first year in office, that fear is gone,” Raymond James analyst Chris Meekins wrote in a note.

Glenview told Bloomberg last month that the fear of politics was leading investors to miss out on “very healthy growth” rates as health insurers traded below “reasonable” valuations. The New York-based hedge fund recently boosted positions in Cigna Corp., HCA Healthcare Inc., Tenet Healthcare Corp., and WellCare Health Plans Inc., among others, according to a 13F analysis by Bloomberg.

Glenview took a new stake in UnitedHealth Group Inc. in the second quarter, when the health-care sector saw a violent sell-off on political concerns.

Analysts also expressed their bullish views after Warren’s new plan. SunTrust’s David MacDonald boosted his price targets on managed-care stocks, saying that the plan allayed some concerns about potentially radical changes in the U.S. health-care system.

Barclays’ Valiquette noted a Medicare program that will offer insurance for Americans over the age of 50, similar to what Warren is now proposing, would be positive for Humana Inc. in particular, given its exposure to Medicare. He estimates a 50 cent EPS benefit from such a program.

Wall Street’s renewed optimism will be tested by the next round of Democratic debates on Wednesday. Raymond James’ Meekins expects Warren to be criticized for changing her stance on health care.

To contact the reporter on this story: Tatiana Darie in New York at tdarie1@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Jennifer Bissell-Linsk

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