What Makes GE Healthcare (GEHC) an Investment Bet?

0

Cooper Investors, an investment management firm, released its “Cooper Investors Global Equities Fund” fourth quarter 2023 investor letter. A copy of the same can be downloaded here. The fund returned +8.31% in the fourth quarter, compared to an 8.75% return for the benchmark MSCI ACWI. For CY2023, the portfolio produced an absolute return of +19%, which was a solid performance in a year marked by extreme volatility and pessimistic economic forecasts from numerous analysts. In addition, please check the fund’s top five holdings to know its best picks in 2023.

Cooper Investors Global Equities Fund featured stocks such as GE HealthCare Technologies Inc. (NASDAQ:GEHC) in the fourth quarter 2023 investor letter. Headquartered in Chicago, Illinois, GE HealthCare Technologies Inc. (NASDAQ:GEHC) is a medical technology, pharmaceutical diagnostics and digital solutions providing company. On January 23, 2024, GE HealthCare Technologies Inc. (NASDAQ:GEHC) stock closed at $73.67 per share. One-month return of GE HealthCare Technologies Inc. (NASDAQ:GEHC) was -5.15%, and its shares gained 7.22% of their value over the last 52 weeks. GE HealthCare Technologies Inc. (NASDAQ:GEHC) has a market capitalization of $33.538 billion.

Cooper Investors Global Equities Fund stated the following regarding GE HealthCare Technologies Inc. (NASDAQ:GEHC) in its fourth quarter 2023 investor letter:

“During the quarter the portfolio initiated a position in GE HealthCare Technologies Inc. (NASDAQ:GEHC). GEHC is the former Healthcare division of GE, spun out in early 2023. It’s a global leader in imaging equipment such as MRI machines, CT scanners and ultrasound systems along with associated consumables. The business has a long and storied history but was trapped inside a larger, underperforming conglomerate, starved of the love and attention it needed to thrive.

From a subset of value perspective, we view GEHC as a Low risk turnaround. The underlying business is fundamentally sound but has ceded market share over time, with sales growth lagging the industry. There is significant margin opportunity with core imaging margins (~50% of sales) much lower than its main peer. We see two drivers in restoring performance. Firstly an increase in research and development spending (since 2017 R&D spend is up 70%, far outpacing revenue growth). Secondly an opportunity to improve SG&A cost efficiency.

What makes the turnaround low risk? Management and Board quality are critical. GEHC features a few of what we call ‘CI Alumni’; executives we have invested behind at other companies. Top of this list is Chairman Larry Culp, the former CEO of Danaher, an executive we have the highest respect for.

GEHC has strong financial characteristics. It is a market leader in an oligopolistic industry where market share changes slowly and gross profit comes largely from aftermarket. The balance sheet is appropriately geared with well structured debt. Our analysis of GEHC’s accounts suggests there may be some conservatism baked into the P&L numbers. At today’s share price you don’t need to assume much going right to do well, which partially reflects the backdrop of healthcare stocks having been under pressure this year. If GEHC can deliver on its potential, the upside is significant.”

Countries with the Lowest Cancer Rates in the World in 2018Countries with the Lowest Cancer Rates in the World in 2018

Countries with the Lowest Cancer Rates in the World in 2018

ESB Professional/Shutterstock.com

GE HealthCare Technologies Inc. (NASDAQ:GEHC) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 41 hedge fund portfolios held GE HealthCare Technologies Inc. (NASDAQ:GEHC) at the end of third quarter which was 44 in the previous quarter.

We discussed GE HealthCare Technologies Inc. (NASDAQ:GEHC) in another article and shared Jim Cramer’s 2024 predictions and top stock picks. In addition, please check out our hedge fund investor letters Q4 2023 page for more investor letters from hedge funds and other leading investors.

 

Suggested Articles:

Disclosure: None. This article is originally published at Insider Monkey.

link

Leave a Reply

Your email address will not be published. Required fields are marked *