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Leading hedge fund and mutual fund managers that have a long-term track record of generating high market-beating returns are slightly under-weight the biotech industry, by a factor of 1.5. However, this can easily be explained as many of the biotech stocks are too small for institutional sponsorship. These high alpha or guru funds number less than 100 or less than one percent of all funds and they control almost ten percent of the U.S. equity discretionary fund assets. Together, they bought a net $104 million of stock in biotech companies, buying $854 million and selling $750 million worth during the quarter. Their top net buys were Gilead Sciences Inc. (GILD) and Celgene Corp. (CELG), and their top net sell was Human Genome Sciences (HGSI). The following are their top buys, sells and holdings:
Amarin Corp. Plc Adr (AMRN) is an Irish developer of novel drugs for the treatment of cardiovascular disease within the field of lipid science. Guru funds added a net $2 million to their $21 million prior quarter position. Top guru funds with a position in AMRN include SAC Capital Advisors LP ($7 million), Driehaus Capital Management ($6 million), Soros Fund Management LLC ($5 million), RS Investment Management ($5 million) and Balyasny Asset Management LLC ($1 million). The mean analyst target is $22, with a high target of $35, well above the current $14 price; and of the eight analysts covering the stock, six rate it a strong buy and the remaining two rate it at a buy.
Amgen Inc. (AMGN) develops therapeutics based on cellular and molecular biology to treat anemia, cancer and inflammatory diseases. Its principal products include Aranesp and Epogen erythropoietic-stimulating agents that stimulate the production of red blood cells; Neulasta and Neupogen to stimulate the production of neutrophils, which is a type of white blood cell that helps the body to fight infections; and Enbrel, an inhibitor of tumor necrosis factor that plays a role in the body’s response to inflammatory diseases. Guru funds sold a net $18 million out of their $224 million prior quarter position. Top guru funds with a position in AMGN include Snow Capital Management ($72 million), Hussman Econometrics Advisors Inc. ($67 million), First Eagle Investment Management LLC ($23 million), SAC Capital Advisors LP ($21 million), and First Pacific Advisors’ [FPA] Crescent Fund ($18 million); seven other guru funds were holding minor positions in AMGN. The mean analyst target is $66, with a high target of $80, well above the current $56 price; and of the 28 analysts covering the stock, 18 rate it at buy/strong buy, eight rate it at hold, and the remaining two rate it at underperform.
Gilead Sciences Inc. (GILD) is a developer of therapeutics to treat viral, fungal, respiratory and cardiovascular diseases. Guru funds added a net $131 million to their $402 million prior quarter position. Top guru funds with a position in GILD include Legg Mason Capital Management ($200 million), Maverick Capital ($139 million), Platinum Investment Management Ltd. ($106 million), Soros Fund Management LLC ($58 million), Hussman Econometrics Advisors Inc. ($17 million) and SAC Capital Advisors LP ($9 million); three other guru funds were holding minor positions in GILD. The mean analyst target is $46, with a high target of $53, above the current $41 price; and of the 28 analysts covering the stock, 20 rate it a buy/strong buy and the remaining eight rate it at a hold.

Dendreon Corp. (DNDN) develops targeted therapeutics to treat cancer using active immunotherapies, monoclonal antibodies and small molecules. Guru funds added a net $66 million to their $439 million prior quarter position. Top guru funds that added during the quarter include SAC Capital Advisors LP ($40 million), Soros Fund Management LLC ($18 million) and Balyasny Asset Management LLC ($9 million). The mean analyst target is $50, with a high target of $66, well above the current $38 price; and of the 25 analysts covering the stock, 18 rate it a buy/strong buy, five rate at a hold, and the remaining two rate it at underperform/sell.
Celgene Corp. (CELG) develops therapies to treat cancer and immune-inflammatory related diseases by regulating cells, genes and proteins. Guru funds added a net $141 million to their $20 million prior quarter position. Top guru funds that added during the quarter include Legg Mason Capital Management ($143 million) and Fisher Asset Management LLC (8 million). The mean analyst target is $67, with a high target of $84, above the current $61 price; and of the 29 analysts covering the stock, 20 rate it a buy/strong buy, eight rate it a hold, and one rates it at a sell.
PDL Biopharma Inc.(PDLI) develops treatments for cancer and immune disorders based on proprietary antibody humanization technology. Guru funds added a net $8 million to their $54 million prior quarter position. Baupost has the only significant position, at $61 million; four other gurus have minor positions totaling less than $2 million. The mean analyst target is $7, with a high target of $8, only slightly above the current $6.30s price; and of the six analysts covering the stock, three rate it a buy and three rate it at a hold.
Biogen Idec Inc. (BIIB) develops treatments for multiple sclerosis [MS], cancer and auto-inflammatory diseases. Guru funds added a net $7 million to their $113 million prior quarter position. Top guru funds with a position in BIIB include Hussman Econometrics Advisors Inc. ($110 million), SAC Capital Advisors LP ($8 million) and four other guru funds with minor positions of less than $1 million. The mean analyst target is $108, with a high target of $129, above the current $105 price; and of the 24 analysts covering the stock, eight rate it a buy/strong buy, fifteen rate it a hold, and the remaining one rates it at sell.
Human Genome Sciences (HGSI) develops gene-based protein and antibody drugs to treat cancer and immunological and infectious diseases. Its principal products in development include BENLYSTA for systemic lupus erythematosus; and raxibacumab for inhalation anthrax. Guru funds sold a net $204 million out of their $255 million prior quarter position. Top guru funds that sold HGSI include SAC Capital Advisors LP ($203 million) and Soros Fund Management LLC ($7 million). The mean analyst target is $33, with a high target of $39, well above the current $23 price; and of the 19 analysts covering the stock, thirteen rate it buy/strong buy, four rate it hold, and the remaining two rate it at underperform/sell.
Incyte Corporation (INCY) develops small molecule drugs to treat cancer, inflammatory disorders, diabetes and other diseases. Guru funds sold a net $52 million out of their $74 million prior quarter position. Top guru funds that sold INCY include SAC Capital Advisors LP ($48 million) and Driehaus Capital Management ($4 million). The mean analyst target is $23, with a high target of $26, above the current $19 price; and of the eighteen analysts covering the stock, sixteen rate it buy/strong buy and two rate it hold.
Alexion Pharmaceuticals (ALXN) develops therapeutics to treat cancer, autoimmune disorders, transplant rejection, hematologic and neurologic diseases. Guru funds added a net $1 million to their $343 million prior quarter position. Top guru funds with a position in ALXN include Columbia Wagner Asset Management LLC ($309 million), Driehaus Capital Management ($27 million), RS Investment Management ($5 million) and SAC Capital Advisors LP ($3 million). The mean analyst target is $54, with a high target of $63, above the current $51 price; and of the 21 analysts covering the stock, 14 rate it a buy/strong buy and seven rate it a hold.
Regeneron Pharmaceuticals (REGN) develops pharmaceutical products to treat inflammatory diseases, eye diseases and cancer. The company’s commercial products include ARCALYST (rilonacept) injection for subcutaneous use for the treatment of cryopyrin-associated periodic syndromes, including familial cold auto-inflammatory syndrome and muckle-wells syndrome in adults and children. Guru funds sold a net $45 million out of their $49 million prior quarter position. Top guru funds that sold REGN include Baupost Group LLC ($45 million) and SAC Capital Advisors LP ($1 million). The mean analyst target is $65, with a high target of $78, well above the current $57 price; and of the fourteen analysts covering the stock, seven rate it buy/strong buy and seven rate it hold.
Intermune Inc. (ITMN) develops novel pharmaceuticals for the treatment of lung conditions and liver disorders. Guru funds added a net $31 million to their $84 million prior quarter position. Top guru funds with a position in ITMN include Columbia Wagner Asset Management LLC ($100 million), Balyasny Asset Management LLC ($7 million), Soros Fund Management LLC ($6 million) and SAC Capital Advisors LP ($2 million. The mean analyst target is $46, with a high target of $58, above the current $36 price; and of the twelve analysts covering the stock, seven rate it a buy/strong buy, four rate it hold, and one rates it sell.
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General Methodology and Background Information: The top new buy and sell ideas of high alpha generating or guru funds were generated through analysis of their latest available institutional 13-F and 13-D/G (5% ownership) filings (as recent as ten days old). This analysis revealed the specific stocks the 70+ gurus bought or sold or held in large or small quantities as an indication of their bullishness or bearishness about those stocks.
The argument is that institutional investors have the resources and the access to information, knowledge and expertise to conduct extensive due diligence in informing their investment decisions. When high alpha generating or guru Institutional Investors, by virtue of their fund performance, low volatility and elite reputation in the investment community, invest and maybe even converge on a specific investment idea, the idea deserves consideration for further investigation. The savvy investor may then leverage this information either as a starting point to conduct his own due diligence or even go as far as constructing a model diversified portfolio based on the guru funds best picks.
Please note that each of the gurus has been carefully selected based on their long-term performance and standing in the investment community. Furthermore, the credentials of most of the 70-odd guru funds that justify their inclusion in this elite group were detailed in our previous articles, many of which can be accessed by clicking on the hyperlinks referencing them in this article.
Furthermore, please note that this series is a follow-up to our previous series that identified top guru holdings by industry group for the prior quarter.
Credit: Historical fundamentals including operating metrics and stock ownership information were derived using SEC filings data, I-Metrix® by Edgar Online®, Zacks Investment Research, Thomson Reuters and Briefing.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 our ‘opinions’ and we may be wrong. We 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 our 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 of High Alpha Funds