In Flamel Technologies S.A. (ADR) (NASDAQ:FLML), Broadfin had a position of 5.15 million shares valued at $88.27 million, its second-largest position. The $629 million pharmaceutical company’s returns did not factor into our returns estimate for Broadfin, with Flamel Technologies S.A. (ADR) (NASDAQ:FLML) returning a solid 5% on the quarter. The France-based company was also a top pick of Flynn’s Deerfield Management, which like Broadfin, is a healthcare-focused fund. The two funds were again the two largest owners of the stock in our database. Overall fund ownership of Flamel Technologies S.A. (ADR) (NASDAQ:FLML) increased to 27 at the end of 2014, from just 18 a quarter previously.
Flynn’s Deerfield did not have a position in Progenics Pharmaceuticals, Inc. (NASDAQ:PGNX), which was Broadfin’s third-largest position. That position was valued at $67.67 million at the end of 2014, and consisted of 8.95 million shares. Progenics Pharmaceuticals, Inc. (NASDAQ:PGNX) is another small pharmaceutical company that did not factor into our returns for Broadfin, and it did not have a good quarter, dipping by 20.9%. Broadfin had the greatest exposure to the stock among funds in our database with billionaire Julian Robertson coming in second.
Those losses were made up for with Broadfin’s fifth-largest position, in Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR), which was up by 24.9% during the first quarter, though it remains down by more than 40% over the past calendar year. The biggest hit came on October 31 after shares crashed by more than 33% following an earnings report which featured greater than anticipated losses and a lowered outlook for full year 2014. More recently, shares surged by 8% in early February after Sarissa Capital revealed an activist position in Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR), which eventually led to an agreement between the two parties that will see an independent director added to Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR)’s board. In addition to Broadfin and Sarissa, billionaires Steve Cohen and Israel Englander also have large positions in Aegerion.
Following the activity of hedge funds like Broadfin can provide many great insights for smaller investors. For one thing, hedge funds looking to invest a lot of money in a company conduct thorough research into the stock, which is usually a costly process that the average investor simply doesn’t have the resources to undertake. We have also discovered through conducting an empirical analysis of hedge funds’ equity portfolios between 1999 and 2012 that funds’ small-cap picks are particularly valuable. The studies showed that imitating a portfolio of the 15 most popular small-cap picks among hedge funds can beat the market by nearly 1.0 percentage point per month on average. Since launching our strategy based on these findings it returned 33.3% in 2012, 53.2% in 2013, and 28.2% in 2014. By comparison, the average return of equity hedge funds amounted to just 4.8%, 11.1%, and 1.4% during those three years, while the S&P 500 ETF (SPY) gained 16%, 32.3%, and 13.5%.
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