At the beginning of September, when the U.S stock markets were in turmoil, Ken Fisher of Fisher Asset Management asserted that the August correction would be “over just as fast as it began”, and he was quite right indeed. Most reputable hedge fund managers have the ability and skills to view financial markets in a totally different way than an average investor. Although they may not turn out to be accurate on all occasions, they still have the necessary set of skills that allow them to picture financial markets as an integrated system and foresee their future state. Fisher Asset Management had a busy third quarter as many other hedge funds in the industry did, as it initiated 140 new positions and sold out of 55 positions during the three-month period. The market value of Ken Fisher’s equity portfolio declined to $48.00 billion from $51.45 billion quarter-over-quarter, mainly owing to the disappointing returns of most equities. The Insider Monkey team has already discussed Ken Fisher’s top stock picks, and top tech and finance stocks at the end of the third quarter, so in this article we will discuss Fisher Asset Management’s top healthcare stock picks at the end of the third quarter.
Hedge funds have been underperforming the market for a very long time. However, this was mainly because of the huge fees that hedge funds charge as well as the poor performance of their short books. Hedge funds’ long positions performed actually better than the market. Small-cap stocks, activist targets, and spinoffs were among the bright spots in hedge funds’ portfolios. For instance, the 15 most popular small-cap stocks among hedge funds outperformed the market by more than 53 percentage points since the end of August 2012, returning 102% (read the details here). This strategy also managed to beat the market by double digits annually in our back tests covering the 1999-2012 period.
#5 Bayer AG (ADR) (OTCMKTS:BAYRY)
Shares Owned by Fisher Asset Management (as of September 30): 4.71 million shares
Value of Holding (as of September 30): $602.08 million
Bayer AG (ADR) (OTCMKTS:BAYRY) is among the 25 largest holdings of Fisher Asset Management at the end of the third quarter, accounting for 1.25% of the value of its entire equity portfolio. Ken Fisher’s investment firm enlarged its position in the company by 102,463 shares during the three-month period. The German drugmaker recently reported third quarter core earnings per share of €1.69 ($1.88), which were up by 28% year-over-year. This increase was mainly achieved thanks to the sales of new drugs, the acquisition of Merck & Co. Inc. (NYSE:MRK)’s consumer health business, and the positive impact of currency exchange rates. However, the company’s management expects a tougher fourth quarter, as a result of the global economic slowdown. Navellier & Associates, founded by Louis G. Navellier, sold out almost its entire stake of roughly 4,000 shares in Bayer AG (ADR) (OTCMKTS:BAYRY) during the third quarter.
#4 Sanofi SA (ADR) (NYSE:SNY)
Shares Owned by Fisher Asset Management (as of September 30): 13.30 million shares
Value of Holding (as of September 30): $631.16 million
Fisher Asset Management lifted its stake in Sanofi SA (ADR) (NYSE:SNY) by 49,373 shares during the September quarter, ending the three-month period with almost 13.30 million shares. The French pharmaceutical company has had a great year so far in terms of stock performance despite being caught in the broader market selloff. In fact, the stock has gained almost 10% since the beginning of the year. Last Thursday, the drugmaker reported sales of €9.59 billion ($10.51 billion), which were up by 3.4% year-over-year, but missed analysts’ expectations by 1.4%. Its business net income came to €2.1 billion ($2.3 billion), up by 5% year-over-year and in line with analysts’ estimates. Warren Buffett’s Berkshire Hathaway owned 3.91 million shares of Sanofi SA (ADR) (NYSE:SNY) at the end of June.
The billionaire’s top three healthcare picks are uncovered on the next page.