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What do the top Hedge Fund and Mutual Fund Gurus like in the Biotech Industry? This article, the ninth in a series, identifies through research of the latest available institutional 13-F filings, the Gurus that are most invested in the Biotech Industry, and the specific Biotech companies they prefer to hold in their hedge fund portfolios. The first eight articles in the series identified Gurus that are over-weight in the Solar sector, Utilities sector, China stocks, Airline sector, Optical Networking sector, Chemicals industry, Oil and Gas Exploration Industry, and the Automobile Industry, and the stocks within those sectors that they hold in their portfolios (For those familiar with the series, skip over to the fifth paragraph).
A Guru is defined as someone who is regarded as having great knowledge, wisdom, and authority in a certain area. When it comes to hedge funds, there are a number of ways to anoint leading managers as Gurus including long-term performance, low portfolio volatility and an elite reputation in the investment community.
Many of us are familiar with leading investors and hedge fund managers such as Warren Buffett, George Soros, Carl Icahn and Julian Robertson, but the hedge fund community alone includes over 9,000 funds; add in mutual funds, ETFs, and other investment entities and the number is likely to be at least two to three times greater. While there is no official list of Gurus, less than one percent or between 100 to 200 fund managers are commonly believed by the larger investment community to have earned that distinction.
The study of the investing habits of Gurus can be informative as these are very savvy, well-respected investors with high personal net worth deploying large sums of capital from their funds on a regular basis. They have a long-term track record of success, and while one can easily just ride their coattails, the savvy investor may want to use these lists as a starting point to conduct their own due diligence.
The total capitalization of the US Equity markets is somewhere in the $15 trillion range, and the total market capitalization of leading Biotech stocks is approximately $260 billion or 1.7% of the overall market. The Table lists six investment Gurus whose funds have invested over four times that, or at least about 6.8%, in the biotech industry. As you will see, although Amgen Inc. (AMGN) as the largest biotech is a core holding for three of these six funds, their holdings spans the entire capitalization range including micro-cap penny stock Cell Therapeutics, Inc. (CTIC) as well small-caps such as Amylin Pharmaceuticals (AMLN) and Mannkind Corp. (MNKD). The following is a complete list of picks in the biotech industry:
  • Large-capitalization biotech companies such as AMGN, Biogen Idec Inc. (BIIB) and Vertex Pharmaceuticals (VRTX).
  • Mid-capitalization biotech companies such as Dendreon Corp. (DNDN), Human Genome Sciences (HGSI) Regeneron Pharmaceuticals (REGN), Cubist Pharmaceuticals (CBST), Biomarin Pharmaceutical (BMRN), Theravance Inc. (THRX), Onyx Pharmaceuticals Inc. (ONXX), and Incyte Corporation (INCY).
  • Small-capitalization biotech companies such as AMLN, MNKD, PDL Biopharma Inc. (PDLI), Isis Pharmaceuticals (ISIS), Viropharma Inc. (VPHM), Exelixis Inc. (EXEL), Questcor Pharmaceutical (QCOR), Acorda Therapeutics Inc. (ACOR), Aveo Pharmaceuticals (AVEO), and Enzon Pharmaceuticals (ENZN).
  • Micro-capitalization biotech companies such as CTIC, Adventrx Pharmaceuticals (ANX), Durect Corporation (DRRX), and Cleveland Biolabs Inc. (CBLI)
Table
Fund and Guru
Type of Fund
Assets Under Management
Percent Portfolio in Biotech Stocks
Major Biotech company positions in Portfolio
Baupost Group LLC (Seth Klarman)
Hedge Fund – Value
$7 billion including $1.7 billion invested in US equities
33.8%
Icahn Capital LP and Icahn Carl C. (Carl Icahn)
Hedge Fund- Shareholder Activist
$ 6.8 billion
11.9%
BIIB, AMLN, REGN, ENZN, EXEL, ANX
Bruce & Co. Inc. (Robert Bruce)
Mutual Fund – Small and Mid-cap Equities Focus
$ 155 million
9.3%
Oaktree Capital Management LP (Howard Marks)
Hedge Fund – Deep Value
$ 60 billion including $2.7 billion in Equities
8.1%
VRTX, VPHM, CBST, BMRN, AMLN, ISIS, AMGN
Perella Weinberg Partners Capital Management LP (Dan Arbess)
Hedge Fund - Multi-Strategy
$ 4 billion including $1 billion in Equities
7.1%
ONXX, INCY, DNDN, AMLN, HGSI, AMGN, MNKD, VRTX, CBLI, QCOR, REGN, ACOR
CQS Cayman LP (Michael Hintze)
Hedge Fund - Multi-Strategy
$ 6.5 billion including $910 million invested in US Equities
7.0%
Baupost Group, headed by Seth Klarman, manages $7 billion in several hedge funds on behalf of individual and institutional investors. He is a value investor, and currently his fund is concentrated in only 15 equities. Besides his $1.7 billion investments in the US equity markets, he also invests in distressed debt and foreign equities and bonds.
Carl Icahn is a well-known American financier and corporate raider. He is an 'activist' hedge fund manager, meaning that he takes large stakes in distressed public corporations, and then uses his influence resulting from the ownership to effect change at these companies, eventually in many cases selling them for a 'tidy' profit. In the past, he has taken substantial or controlling positions in RJR Nabisco, TWA (TWAIQ.PK), Texaco, Philips Petroleum, Western Union (WU), Gulf & Western, Viacom (VIA), Uniroyal, Dan River, Marshall Field, American Can, USX, Marvel Comics, Revlon(REV), Imclone, Federal-Mogul (FDML), Fairmont Hotels, Blockbuster (OTC:BLOAQ), Kerr-McGee, Time Warner (TWX) and Motorola (MMI).
Bruce & Co. Inc. Mutual Fund (BRUFX) is run by father and son team Robert and Jeff, and they invest mostly in small- and mid-cap equities.
With total assets under management (AUM) of over $60 billion, including $2.7 billion in equities, hedge fund Oaktree Capital Management (headed by Howard Marks) was founded in 1995 and offers strategies in high-yield debt, convertibles, distressed debt, private equity and real estate.
Perella Weinberg Partners, a hedge fund, founded by Joseph R. Perella and Peter Weinberg in 2006, has $4 billion AUM including over $1 billion in equities, and employs a multi-strategy approach.
London-based Hedge Fund CQS Management, founded by Australian Michael Hintze, uses a multi-strategy approach in making its investments. Its hedge funds include the CQS Convertible and Quantitative Strategies Fund, Credit Long/Short Fund, Directional Opportunities Fund, Asset Backed Securities Fund, Asia Fund, and Diversified Fund.
Historical fundamentals including operating metrics and stock ownership information were derived using I-Metrix® by Edgar Online®, Zacks Investment Research, Thomson Reuters and Briefing.com. Fund data including assets under management and firm profiles are sourced mostly from www.hedgetracker.com. The information and data is believed to be accurate, but no guarantees or representations are made.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are my opinions and I may be wrong. I may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to my thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.
Source: Top Biotech Picks by Hedge Fund and Mutual Fund Gurus Concentrated in the Sector