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Accipiter Capital Management is a hedge fund that focuses on the healthcare sector. Its founder, Gabe Hoffman, had years of experience in this industry. Before establishing Accipiter in 2002, Hoffman worked at Welch Capital Partners, another hedge fund that also specializes in healthcare. Prior to that, Hoffman covered the biotech and pharmaceutical sectors at Paramount Capital, a biotechnology merchant banking firm and a hedge fund manager. Accipiter is more than a healthcare specialized hedge fund. Based in New York, Accipiter is an activist hedge fund like Bill Ackman's Pershing Square. We like activist hedge funds because activist investing requires additional skills and yields much higher returns when done right. Below we compiled a list of top positions in Accipiter’s portfolio as of September 30, 2011.

Company Name

Ticker

Value

Activity

HEALTHSOUTH CORP

HLS

19934

508%

HCA HOLDINGS INC

HCA

17640

181%

HEALTH MGT ASSOCIATES

HMA

11709

130%

ORCHID CELLMARK INC

ORCH

10515

0%

TEVA PHARMACEUTICAL

TEVA

9762

6%

MYLAN INC

MYL

7729

New

BIOMARIN PHARMA

BMRN

7390

0%

AETNA INC NEW

AET

6948

0%

LIFEPOINT HOSPITALS INC

LPNT

6699

144%

COMMUNITY HEALTH SYS

CYH

5837

54%

SANOFI AVENTIS

SNY

5713

-36%

UNITED THERAPEUTICS

UTHR

5249

New

C I G N A CORP

CI

4775

0%

COVENTRY HEALTH CARE

CVH

4532

0%

ZIMMER HOLDINGS INC

ZMH

3711

5%

STEWART ENTERPRISES

STEI

3518

0%

ASSISTED LIVING CONCEPTS

ALC

1845

28%

SERVICE CORP INTL

SCI

1185

0%

CUTERA INC

CUTR

812

7%

R T I BIOLOGICS INC

RTIX

653

-89%

During the third quarter, Hoffman slightly reduced his portfolio value from $169 million to $137 million. Hoffman also reduced the number of positions in his portfolio from 28 at the end of June to 24 at the end of September. The fund sold out ten positions, including Wellpoint Inc (WLP), Gilead Sciences Inc (NASDAQ:GILD), Express Scripts Inc (NASDAQ:ESRX), Boston Scientific Corp (NYSE:BSX), Carefusion Corp (NYSE:CFN), Immucor Inc (NASDAQ:BLUD), Emeritus Corp (NYSE:ESC), Syneron Medical Ltd (NASDAQ:ELOS), Solta Medical Inc (NASDAQ:SLTM), and Adolor Corp (ADLR). Most of these stocks underperformed the market since the end of September, during which SPY returned 2.82%. For instance, the biggest position sold out by Hoffman in the third quarter was WLP and it lost 2.42% since the end of September.

Hoffman significantly increased his position in Healthsouth Corp (NYSE:HLS). Accipiter reported to have $20 million invested in the stock, up 508% from the end of June. The stock returned 6.76% since the end of the third quarter, beating the SPY by almost four percentage points. Hoffman also increased his stakes in HCA Holdings Inc (NYSE:HCA) by 181% to $17.6 million and his position in Health Management Associates Inc (NYSE:HMA) by 130% to $11.7 million. Both stocks outperformed the market. HCA gained 16.37% and HMA returned 7.80% since September 30. HLS, HCA and HMA were also the top three largest positions in Hoffman’s portfolio at the end of September. David Einhorn was bullish about HCA as well, increasing his position by 91% to $113 million.

Hoffman was also bullish about Mylan Inc (NASDAQ:MYL). His Accipiter initiated a brand new $7.7 million MYL position over the third quarter. The stock returned 2.47% so far since the end of September, slightly lower than the 2.82% of the market. Hoffman also bought new stakes in United Therapeutics Corp (NASDAQ:UTHR). Accipiter did not disclose owning any shares of UTHR at the end of June and it reported to have $5.2 million invested in the stock at the end of the third quarter. UTHR gained 4.91% since the end of September, outperforming SPY by over two percentage points.

The top three positions of Accipiter at the end of September generated a weighted average return of 10.45%, beating the SPY by more than 7%. The fund also promptly sold out a few stocks that performed poorly so far in the fourth quarter. Additionally, Hoffman’s experience is invaluable for a hedge fund focusing on the healthcare industry. We like Hoffman and his Accipiter Capital Management, and we believe that investors will be able to beat the market by focusing on Accipiter’s best stock picks.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Activist Hedge Fund Accipiter Capital's Top Stock Picks