Glenview Capital Management starts new positions 3Q 2013

Part 5
Glenview Capital Management starts new positions 3Q 2013 (Part 5 of 6)

Glenview Capital Management starts new positions in AAP, AMT, DG, NXPI, sells NTAP, ROVI—13F Flash E

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Glenview Capital Management is a private investment management firm with more than $7 billion of assets under management. The firm was founded in 2000 by Lawrence “Larry” Michael Robbins. It manages capital for qualified investors through a series of private investment funds. Glenview has offices in New York and London. The $7 billion is split between Glenview Funds, a short fund, and Little Arbor Funds, a multi-strategy fund. Robbins generates his returns making concentrated bets on large-cap stocks. Glenview focuses on delivering attractive absolute returns through deep fundamental research and individual security selection.

The firm started new positions in Advance Auto Parts Inc. (AAP), American Tower Corp. (AMT), Dollar General Corp. (DG), and NXP Semiconductors (NXPI) and it sold positions in NetApp (NTAP) and Rovi Corporation (ROVI).

Abbreviated financial summaries and metrics for these securities are included below. Detailed analysis and recommendations require a subscription (more information at the bottom of the article).

Why sell NetApp Inc. (NTAP)?

NetApp is a risky investment currently because of its exposure to the U.S. Federal government and European businesses. Sales to original equipment manufacturers (OEMs) for NetApp have been in decline for the last three years. Even though the company guided to gross margins of 61% in 2014, which was in line with last year, its revenue outlook remains weak. A reason for buying NetApp earlier in the year was the fact that the company announced a $1 billion stock buyback in 2013 and another in 2014. We feel that at this point, company buybacks have been priced into the security. Without revenue growth, the buybacks probably won’t have much further impact on the stock. Plus, since more than 50% of the company’s sales are overseas, a stronger dollar would negatively impact the business in the event that the U.S. Federal Reserve begins to taper its quantitative easing program.

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Glenview Capital Management founder Lawrence “Larry” Michael Robbins graduated from the University of Pennsylvania and has a degree from the Wharton School of Engineering and the Moore School of Engineering. He has been known for his love for the healthcare sector. In a press release, Glenview stated that its investment in hospitals, which totals approximately $2.0 billion across five major U.S. hospital chains, reflects its affinity for the long-term growth and stability of the business, its recognition of the growth opportunities available through implementing expanded insurance coverage, its belief in the structural competitive advantages of for-profit hospital chains, and its excitement about the opportunities to reinvest in the industry’s strong cash flows and growing debt capacity as profitability builds through time. Robbins is known to take a more activist approach to some of his large bets, and he publicly voices his concerns about what management is doing and demands change.

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