Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

How Did Michael Castor’s Picks Play Out in Q4?

Page 1 of 5

Chances are that some people have not heard of Michael Castor or his healthcare-focused hedge fund Sio Capital. Mr. Castor started Sio Capital in 2006 after working for five years at Bernstein Investment Research and Management. Prior to that, he worked in the investment banking/equity capital markets division of JP Morgan. He holds an MD from Ohio State University College of Medicine and before entering the field of finance in mid 2000 used to be a surgeon. Since its inception in 2006 and till 2013, Sio Capital generated an average annual return of 10.4% versus the S&P 500 Total Return Index’s return of 3.8%. The surprising thing behind that outperformance was that it was generated while remaining nearly market neutral with a portfolio beta of only 0.15. The fund continued with that outperformance in 2014 by generating over 20% in returns.

We at Insider Monkey consistently track Sio Capital’s portfolio because several of the fund’s stock picks have become multibaggers in the past and the fund continues to outperform most of its peers without taking any undue risks. According to Sio Capital’s last submitted 13F filing, its US equity portfolio at the end of September was worth $145.9 million, almost 28% lower than the $202.4 million it was worth at the end of June. The filing also revealed that during the third quarter the Sio Capital’s portfolio saw a very high turnover of 73.53%. In this article we will be looking at the performance of Sio Capital’s top five equity holdings – which in aggregate accounted for 36.7% of the value of the fund’s equity portfolio at the end of September- during the final quarter of 2015 and analyze whether the fund made the right decision by betting on them.

Michael Castor
Michael Castor
Sio Capital

An everyday investor does not have the time or the required skill-set to carry out an in-depth analysis of equities and identify companies with the best future prospects like a hedge fund can. However, it is also not a good idea to pay the egregiously high fees that investment firms charge for their stock picking expertise. Thus a retail investor is better off to monkey the most popular stock picks among hedge funds by him or herself. But not just any picks mind you. Our research has shown that a portfolio based on hedge funds’ top stock picks (which are invariably comprised entirely of large-cap companies) falls considerably short of a portfolio based on their best small-cap stock picks. The most popular large-cap stocks among hedge funds underperformed the market by an average of seven basis points per month in our back tests, whereas the 15 most popular small-cap stock picks among hedge funds outperformed the market by nearly a percentage point per month over the same period between 1999 and 2012 (read the details here).

#5 Cardinal Health Inc (NYSE:CAH)

– Shares Owned by Sio Capital (as of September 30): 94,868

– Value of Holding (as of September 30): $7.29 million

Although shares of Cardinal Health Inc (NYSE:CAH) mostly remained in the $80-$90 range throughout 2015, starting the fourth quarter relatively low helped them to end the three-month period with gains of 16%. Cardinal Health Inc (NYSE:CAH) has been among Sio Capital’s favorite stock picks since 2013. Most of the gains the stock made during the fourth quarter came before the company declared its fiscal 2016 first quarter results on November 2. Since Cardinal Health beat analysts’ expectations of EPS of $1.10 on revenue of $27.19 billion by reporting EPS of $1.38 on revenue of $28.10 billion, its stock managed to sustain those gains.

The acquisition-driven growth strategy that Cardinal Health has followed seems to be working wonderfully for the firm as it has managed to beat analysts’ expectations for several quarters in a row. On December 21, the company announced that its naviHealth subsidiary has completed the acquisition of RightCare Solutions, although it didn’t disclose the financial terms of the deal. This announcement came just two months after the company had reported the completion of its acquisition of Johnson & Johnson’s Cordis business unit for $1.944 billion. Billionaire Jim Simons‘ Renaissance Technologies was one of the hedge funds that initiated a stake in Cardinal Health during the third quarter; it purchased 685,700 shares of the company.

Follow Cardinal Health Inc (NYSE:CAH)
Trade (NYSE:CAH) Now!

Page 1 of 5

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!