5 Health Care Stocks John Paulson Is Buying Ahead of 2015

 NEW YORK (Stockpickr) -- At Stockpickr, we track the top holdings of a variety of high-profile investors, such as Warren Buffett and Carl Icahn.

One of our most popular professional portfolios is that of John Paulson's Paulson & Co.. As we look forward to 2015, we thought we'd single out some of Paulson's recent buys.

What follows is a closer look at six health care stocks that Paulson bought in the most recently reported quarter ended Sept. 30. Each of these stocks comprises at least 1.8% of John Paulson's portfolio as of that date. They are ordered here by position size.

5. HCA Holdings

HCA Holdings (HCA) comprises 1.8% of Paulson & Co.'s portfolio as of the most recently reported quarter. The 6.1 million-share position is an increase of 2.7 million shares, or 78.4%, over the previous quarter.

TheStreet Ratings team rates HCA Holdings as a buy with a ratings score of B-. TheStreet Ratings team has this to say about its recommendation:

"We rate HCA Holdings (HCA) a buy. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income, revenue growth, good cash flow from operations and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Powered by its strong earnings growth of 46.83% and other important driving factors, this stock has surged by 59.44% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, HCA should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Health Care Providers & Services industry. The net income increased by 41.9% when compared to the same quarter one year prior, rising from $365.00 million to $518.00 million.
  • HCA's revenue growth trails the industry average of 19.9%. Since the same quarter one year prior, revenues slightly increased by 9.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Net operating cash flow has increased to $1,128.00 million or 25.33% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -20.01%.
  • HCA Holdings has improved earnings per share by 46.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, HCA Holdings reported lower earnings of $3.36 versus $3.49 in the prior year. This year, the market expects an improvement in earnings ($4.55 versus $3.36).

You can view the full analysis from the report here: HCA Ratings Report

4. Mylan

Mylan (MYL) comprises 2.4% of Paulson & Co.'s portfolio as of the most recently reported quarter. The 12.5 million-share position is an increase of 264,000 shares, or 3%, over the previous quarter.

TheStreet Ratings team rates Mylan as a buy with a ratings score of A-. TheStreet Ratings team has this to say about its recommendation:

"We rate Mylan (MYL) a buy. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, attractive valuation levels, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 8.8%. Since the same quarter one year prior, revenues rose by 17.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 215.00% and other important driving factors, this stock has surged by 32.65% over the past year, outperforming the rise in the S&P 500 Index during the same period. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • Mylan reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, MYLAN INC increased its bottom line by earning $1.58 versus $1.53 in the prior year. This year, the market expects an improvement in earnings ($3.56 versus $1.58).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Pharmaceuticals industry. The net income increased by 214.1% when compared to the same quarter one year prior, rising from $158.91 million to $499.10 million.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Pharmaceuticals industry and the overall market, Mylan's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.

You can view the full analysis from the report here: MYL Ratings Report



3. AbbVie

AbbVie (ABBV) comprises 3.1% of Paulson & Co.'s portfolio as of the most recently reported quarter. The 13 million-share position was a new buy in the quarter.

TheStreet Ratings team rates AbbVie as a buy with a ratings score of B-. TheStreet Ratings team has this to say about its recommendation:

"We rate AbbVie (ABBV) a buy. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 8.8%. Since the same quarter one year prior, revenues slightly increased by 7.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, ABBV's share price has jumped by 25.03%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, ABBV should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The gross profit margin for ABBVIE INC is currently very high, coming in at 82.25%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 10.08% trails the industry average.
  • AbbVie's earnings per share declined by 48.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, AbbVie increased its bottom line by earning $2.56 versus $0.96 in the prior year. This year, the market expects an improvement in earnings ($3.29 versus $2.56).
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Pharmaceuticals industry and the overall market, AbbVie's return on equity significantly exceeds that of both the industry average and the S&P 500.

You can view the full analysis from the report here: ABBV Ratings Report

2. Mallinckrodt

Mallinckrodt (MNK) comprises 3.4% of Paulson & Co.'s portfolio as of the most recently reported quarter. Paulson increased his stake in the stock to 9 million shares.

TheStreet Ratings team rates Mallinckrodt as a sell with a ratings score of D. TheStreet Ratings team has this to say about its recommendation:

"We rate Mallinckrodt (MNK) a sell. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Pharmaceuticals industry. The net income has significantly decreased by 1151.9% when compared to the same quarter one year ago, falling from $33.50 million to -$352.40 million.
  • Mallinckrodt has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, Mallinckrodt swung to a loss, reporting -$3.57 versus $0.06 in the prior year. This year, the market expects an improvement in earnings ($6.50 versus -$3.57).
  • MNK's debt-to-equity ratio of 0.80 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.39 is sturdy.
  • Compared to other companies in the Pharmaceuticals industry and the overall market, Mallinckrodt's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for Mallinckrodt is rather high; currently it is at 67.52%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -44.64% is in-line with the industry average.

You can view the full analysis from the report here: MNK Ratings Report

1. Covidien

Covidien (COV) comprises 4.5% of Paulson & Co.'s portfolio as of the most recently reported quarter. The 12.6 million-share position is an increase of 5.6 million shares, or 79.9%, over the previous quarter.

TheStreet Ratings team rates Covidien as a buy with a ratings score of A. TheStreet Ratings team has this to say about its recommendation:

"We rate Covidien (COV) a buy. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, increase in net income, revenue growth and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Powered by its strong earnings growth of 43.03% and other important driving factors, this stock has surged by 53.23% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, COV should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Covidien has improved earnings per share by 43.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, Covidien increased its bottom line by earning $3.64 versus $3.40 in the prior year. This year, the market expects an improvement in earnings ($4.35 versus $3.64).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Health Care Equipment & Supplies industry. The net income increased by 39.0% when compared to the same quarter one year prior, rising from $372.00 million to $517.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.2%. Since the same quarter one year prior, revenues slightly increased by 6.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The gross profit margin for Covidien is rather high; currently it is at 65.95%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 18.91% is above that of the industry average.

You can view the full analysis from the report here: COV Ratings Report

For Paulson's top 30 holdings, visit Paulson & Co.'s portfolio on Stockpickr.

Stockpickr is a wholly owned subsidiary of TheStreet.com.

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