Mid- and large-cap biotech companies, especially the large caps, generally have products in the marketplace that generate revenue, and in many cases the companies have reached sustained profitability. This contrasts with the world of small-cap biotech companies that generally have no commercial products, but rather a pipeline of product candidates being tested in early- to late-stage clinical trials for a variety of disease conditions. The small-cap biotech companies are speculative by definition, with potential revenue often being many years in the future, and hence they attract a less risk-averse investor. Mid- and large-cap biotech companies in contrast often are more attractive to conservative investors that look for revenue and sustained profitability in constructing value thesis. Hence, we have broken down the companies in the biotech group into these two categories in discussing the investments of legendary or guru fund managers in the biotech industry.
In this article, we identify mid- and large-cap biotech companies that are being accumulated and those being distributed by legendary or guru fund managers such as Warren Buffett, George Soros, Carl Icahn, Steven Cohen and Mario Gabelli, based on our extensive database of the buying and selling activities of over 60+ such managers. Overall, gurus are bullish on mid- and large-cap biotech, adding a net $180 million to their prior $2.70 billion position in the group, selling $590 million and buying $770 million worth of stocks in the group. Furthermore, overall they are under-weight in the group by a factor of 0.58; that is taken together guru funds have invested 0.7% of their capital in mid- and large-cap biotech companies compared with their 1.2% weighting in the market.
The hedge fund and mutual fund managers in this select group include only high profile names who by virtue of their long-term market-beating returns have earned their standing in the investment community and are worthy of our attention. They include well-known names such as those mentioned above, as well as perhaps relatively lesser-known names that also have a stellar long-term history of beating the markets, such as Seth Klarman, John Griffin, Prem Watsa, Robert Karr and Lee Ainslie.
The following are the mid- and large-cap biotech companies that these guru fund managers are most bullish and bearish about (see Table):
Guru Funds Bearish on Biogen Idec Inc. (BIIB): BIIB develops treatments for multiple sclerosis, cancer and auto-inflammatory diseases. Guru funds cut a net $193 million from their $441 million prior quarter position. Top guru funds that sold BIIB during the June quarter included Icahn Capital LP ($293 million) and Hussman Econometrics Advisors Inc. ($32 million). Other major investors in BIIB include PRIMECAP Management (25.1 million or 10.3% of outstanding shares) and Capital Research Global Investors (21.5 million or 8.9% of outstanding shares). Guru Funds Bullish on Amylin Pharmaceuticals (AMLN): AMLN develops drugs for the treatment of diabetes, obesity and other diseases. Guru funds together added $339
million to their $53 million prior quarter position, buying $342 million and selling $3 million worth of stock. Major buyers include Icahn Capital LP
($156 million) and SAC Capital Advisors LP
($27 million), with Icahn now owning almost 20% of the outstanding shares. Other major investors in AMLN include Fidelity Investments and Wellington Capital Management, each owning approximately 14%-15% of the outstanding shares.
Guru Funds Bearish on Gilead Sciences Inc. (GILD): GILD is a developer of therapeutics to treat viral, fungal, respiratory and cardiovascular diseases. Guru funds cut a net $52 million to the $488 million prior quarter position. Top guru funds with a position in GILD include Maverick Capital ($127 million), Legg Mason Capital Management ($127 million) and Platinum Investment Management Ltd. ($125 million). Top sellers during the June quarter included Legg Mason Capital Management ($56 million) and Soros Fund Management LLC ($30 million). Furthermore, Fidelity Investments with 40.5 million or 5.3% of the outstanding shares is the largest institutional holder of GILD.
Guru Funds Bearish on Vertex Pharmaceuticals (VRTX): VRTX engages in the discovery, development, and commercialization of small molecule drugs for the treatment of hepatitis C, inflammatory and autoimmune disorders, pain and cancer. Guru funds sold a net $12 million out of their $15 million prior quarter position, and together hold only 0.04% of
the outstanding shares. Top sellers of VRTX include Soros Fund Management LLC
($9 million) and SAC Capital Advisors LP
Guru Funds Neutral on Incyte Corporation (INCY
): INCY develops small molecule drugs for hematologic and oncology indications, and inflammatory and autoimmune diseases. Guru funds added a net $2 million to their $21 million prior quarter position. Top guru funds that hold INCY include SAC Capital Advisors LP
($20 million) and Driehaus Capital Management
($3 million). Other major investors in INCY include T Rowe Price (14.7 million or 11.7% of outstanding shares) and Capital World Investors (13.9 million or 11.0% of outstanding shares).
Gurus Bullish on Onyx Pharmaceuticals Inc. (ONXX): ONXX develops small molecule drugs designed to prevent cancer cell proliferation and angiogenesis. Guru funds added a net $8 million to their $73 million prior quarter position. Top guru funds that hold ONXX include Columbia Wagner Asset Management LLC ($67 million) and York Capital Management Global Advisors LLC ($10 million). Other major investors in ONXX include Wellington Management (5.7 million or 8.9% of outstanding shares) and Fidelity Investments (3.2 million or 5.0% of outstanding shares).
Guru Investors Neutral on Human Genome Sciences
): HGSIdevelops 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 added a net $1 million to their $29 million prior quarter position. Top guru funds that hold HGSI include Legg Mason Capital Management ($18 million) and SAC Capital Advisors LP ($8 million). Other major investors in HGSI include Fidelity Investments (28.4 million or 14.9% of outstanding shares) and T Rowe Price (25.4 million or 13.3% of outstanding shares).
Guru Funds Bearish on 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 $20 million out of their $198 million prior quarter position. Top guru funds with a position in AMGN include Snow Capital Management ($68 million), Hussman Econometrics Advisors Inc. ($64 million), First Eagle Investment Management LLC ($22 million), and First Pacific Advisors’ (FPA) Crescent Fund ($17 million). The two largest institutional owners of AMGN stock are PRIMECAP Management with 49.7 million or 5.4% of outstanding shares, and Fidelity Investments with 39.9 million or 4.3% outstanding shares.
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General Methodology and Background Information: The latest available institutional 13-F filings of over 60+ legendary or guru hedge fund and mutual fund managers were analyzed to determine their capital allocation from among 50+ different industry groupings, and to determine their favorite picks and pans in each group. Each guru has been carefully selected based on their long-term performance and standing in the investment community. Furthermore, the credentials of most of the 60-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 the above Table and in article.
These legendary or guru fund managers number less than one percent of all funds and yet they control almost ten percent of the U.S. equity discretionary fund assets. 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.
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.