I recently published a report over at Chimera Research Group titled 13F Analysis of Best Performing Healthcare Hedge Funds (Q1 2015).
As free preview to the Chimera article, below is a list of the best performing healthcare specialists, judged by replicating the holdings disclosed in their 13F filings. For details on how these portfolios were constructed, see the geek notes below.
As implied by the article title, I identify the best performing healthcare focused hedge funds from the list of 35+ 13F filers I track. From this list I created a "best ideas" portfolio by looking for stocks that multiple managers own. The intuition is this: if two biotech specialists with great track records, who are presumably competitors, are both in the same stock, its worth a look. The entire article, including stock picks, is available over at Chimera Research Group.
To be perfectly clear: These are the not returns of the funds listed, rather they are the returns of buying the stocks listed on the fund's 13F filing.
Portfolio Construction Notes:
One of the most controversial names in biotech has been Arrowhead Research (ARWR).
The market was very disappointed with ARWR's late-breaking abstract for the American Association for the Study of Liver Disease (AASLD) meeting, part of the ongoing Phase 2a study of ARC-520 for hepatitis B. The abstract was released October 8th, 2014. The meeting is November 7-11, and is commonly referred to as The Liver Meeting.
Investors were looking for a 1 log reduction in Hepatitis B virus from Arrowhead's ARC-520. However the company delivered a 0.3 log reduction in HBV, falling short of expectations.
The stock has declined more than 50% on the news. Management has tried to assuage investors with an open letter to shareholders.
For a good summary of the situation, I'll refer you to Adam Feuerstein's article at TheStreet.com. For a more scientific take on the data, check out Dirk Haussecker's RNAi Therapeutics blog.
However, this hasn't stopped Daniel Gold's QVT Financial from increasing it's stake to 4,030,882 shares as of October 8, 2014. The stock closed at $7.03 that day after trading as low as $5.47, they now own 7.62% of the company . This position is up from 1,819,982 shares as of June 30, 2014.
QVT Financial manages more than $8 billion, and has 27% of its 13F portfolio in healthcare. QVT originated as a non-traditional proprietary trading group, lead by Deutsche Bank alumni Daniel Gold.
The bull case for Arrowhead Research centers around the signs of efficacy we have seen thus far, and ARC-520 clean safety profile. Bulls think the viral knockdown to be demonstrated in higher/multiple doses (3-4mg/kg) will be sufficient for a high level of HBV knockdown.
This is the personal blog of Emory Redd.
This blog is not investment advice. This is not a solicitation to invest. Don't take candy from strangers.
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