Eaton Vance Worldwide Health Sciences Fund 3rd Quarter Commentary

The fund is the only guru invested in the company.

Exact Sciences

The Health Sciences Fund invested in 53,522 shares of Exact Sciences for an average price of $61.83 per share, dedicating 0.38% of the equity portfolio to the holding.

The health care diagnostics and research company, which is headquartered in Wisconsin, has a $9.07 billion market cap; its shares were trading around $73.82 on Friday with a price-book ratio of 12.60 and a price-sales ratio of 22.52.

Based on the median price-sales chart, the stock appears to be trading below its historical value.

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Supported by a high Altman Z-Score of 6.65 and good cash-to-debt and debt-to-equity ratios, GuruFocus rated Exact Sciences' financial strength 6 out of 10. The company's profitability and growth scored a 5 out of 10 rating. Although the company has an expanding operating margin, it underperforms 66% of competitors. The company also has a moderate Piotroski F-Score of 5 and a one-star business predictability rank. According to GuruFocus, companies with this rank typically see their stock prices gain an average of 1.1% per year.

With 2.92% of outstanding shares, PRIMECAP Management (Trades, Portfolio) is the company's largest guru shareholder. Jones, Pioneer, Jim Simons' (Trades, Portfolio) Renaissance Technologies, Joel Greenblatt (Trades, Portfolio), Fisher and John Hussman (Trades, Portfolio) also hold the stock.

SanBio

Eaton Vance picked up 92,232 shares of SanBio for an average price of 3,022.15 yen per share, giving it 0.32% space in the equity portfolio.

The Japanese biotech company, which focuses on developing regenerative cell drugs, has a market cap of 182.95 billion yen; its shares closed at 3,685 yen on Thursday with a price-book ratio of 16.92 and a price-sales ratio of 264.24.

The median price-sales chart shows the stock is trading above its historical average.

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SanBio's financial strength was rated 6 out of 10 by GuruFocus, boosted by a high Altman Z-Score of 25.29. The company's profitability and growth scored a 3 out of 10 rating due to weak margins and returns and a moderate Piotroski F-Score of 4. The company has also recorded a decline in revenue per share over the last several years.

No other gurus have positions in the stock.

NMC Health

The fund bought 51,719 shares of NMC Health for an average price of 37.19 pounds ($48.33) per share, allocating 0.25% of the equity portfolio to the position.

Headquartered in Abu Dhabi, United Arab Emirates, the London-listed health care provider has a market cap of 7.35 billion pounds; its shares closed at 35.32 pounds on Thursday with a price-earnings ratio of 45.87, a price-book ratio of 8.34 and a price-sales ratio of 6.07.

According to the Peter Lynch chart, the stock is overpriced.

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GuruFocus rated NMC Health's financial strength 5 out of 10. Despite issuing approximately $698.4 million in new long-term debt over the last three years, the company's Altman Z-Score of 4.31 indicates it is in good financial standing. The company's profitability and growth scored a 7 out of 10 rating, boosted by an expanding operating margin, good returns and a moderate Piotroski F-Score of 4. GuruFocus also warned that the company has seen a slowdown in revenue per share growth over the last 12 months and its assets are building at a faster rate than its revenue is growing, suggesting it is becoming less efficient.

The Vanguard Health Care Fund (Trades, Portfolio) is also a shareholder.

Idorsia

The Worldwide Health Sciences Fund invested in 96,587 shares of Idorsia for an average price of 25.37 Swiss francs ($25.35) per share, dedicating 0.23% of the equity portfolio to the holding.

The Swiss biotech company, which focuses on developing treatments for the central nervous system, cardiovascular disorders, immunological disorders and orphan diseases, has a market cap of 2.6 billion francs; its shares closed at 19.85 francs on Thursday with a price-book ratio of 3.99 and a price-sales ratio of 13.82.

Year to date, the stock has fallen 22%.

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Fueled by a Sloan ratio that suggests poor earnings quality, Idorsia's financial strength was rated 5 out of 10 by GuruFocus. In addition to having weak cash-to-debt and debt-to-equity ratios, the Altman Z-Score of 2.84 suggests the company is under some financial pressure. The company's profitability and growth fared even worse with a 2 out of 10 rating as a result of negative margins and returns. Regardless, the company's operating and net margins are outperforming 52% of industry peers. In addition, its returns outperform competitors.

Vanguard also has a position in the stock, holding 0.62% of outstanding shares.

Other trades

During the quarter, Eaton Vance also added to its Novartis AG (NVS), Roche Holding AG (ROG.SW), GlaxoSmithKline PLC (GSK.L), Agilent Technologies Inc. (A), Merck & Co. Inc. (MRK) and Galapagos NV (GLPG) holdings.

The fund's $1.06 billion equity portfolio is composed of 62 stocks. According to its fact sheet, the fund underperformed the MSCI World Health Care Index in 2017 with a return of 16.24%. The index posted a 19.80% return.

Disclosure: No positions.

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This article first appeared on GuruFocus.

Source : https://finance.yahoo.com/news/eaton-vance-worldwide-health-sciences-164003236.html

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