Investing in the healthcare sector can be tricky, especially if you’re looking for high returns and want to invest in clinical-stage companies, which represent an above-average risk. Many retail investors do not want to dispense a significant amount of money to take a shot at the sector and that is where we come in. We have compiled a list of five healthcare companies which have stock prices under $10 and have a significant potential to the upside. In fact, the validation of their future prospects comes from professional money managers themselves, and not just any professional money managers, but only the very elite among them, whom we exclusively track. These hedge funds have taken significant positions in these companies after rigorous research and we believe you should carefully consider adding these stocks to your own portfolio.
Let’s first take a step back and analyze how tracking hedge funds can help an everyday investor. Through our research we discovered that a portfolio of the 15 most popular small-cap picks of hedge funds beat the S&P 500 Total Return Index by nearly a percentage point per month on average between 1999 and 2012. On the other hand the most popular large-cap picks of hedge funds underperformed the same index by seven basis points per month during the same period. This is likely a surprise to many investors, who think of small-caps as risky, unpredictable stocks and put more faith (and money) in large-cap stocks. In forward tests since August 2012 these top small-cap stocks beat the market by an impressive 60 percentage points, returning 118% (read the details here). Follow the smart money into only their best investment ideas all while avoiding their high fees.
In fifth place is the biopharmaceutical company Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN). Even though the company’s stock price has slid by more than 36% so far this year, a total of 25 hedge funds among those that we track had an aggregate investment of $266.34 million in Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN) at the end of June. The aggregate stakes represent 25.6% of the company’s outstanding shares. Peter Kolchinsky‘s RA Capital Management is the largest stockholder of Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN) within our database and increased its stake by 22% during the second quarter to 9.95 million shares.