2013 is panning out to be a good year for AmerisourceBergen (ABC). Shares of the pharmaceutical distributor have climbed almost 9% year-to-date, topping even the impressive performance of the S&P over that same period. But hedge funds have missed out on those gains. Funds sold off 7.43 million shares of ABC last quarter, cutting their stake in the firm by 84%. So, was it worth it? In my view, yes.
AmerisourceBergen is one of the biggest pharmaceutical distributors in the U.S., a business that involves acting as a middleman between pharmaceutical manufacturers and healthcare providers. It's a business that provides slim margins -- after all, if profitability grew too attractive pharmaceutical and healthcare firms could just fire the middleman and replicate ABC's offerings internally.In other words, AmerisourceBergen is attractive because its business isn't. Even though health care reforms should provide ABC with some tailwinds in the next couple of years, extremely tight competition and an industry ruled by oligarchy make finding an edge difficult. AmerisourceBergen may be the most attractive distributor in the industry, but I'd rather avoid pharma distributors in toto.
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