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XenoPort, Inc. And DBV Technologies SA: Two Healthcare Stocks With Opposing Momentum

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XenoPort, Inc. (NASDAQ:XNPT) saw its stock price surge by more than 7% in pre-market trading today, owing to the success of its XP23829 treatment in s mid-stage psoriasis study. However, the momentum couldn’t last, as the stock has crumbled by more than 25% in early-afternoon trading. DBV Technologies SA – ADR (NASDAQ:DBVT) on the other hand also posted gains in pre-market trading today, of 3.09%, and continued that momentum into the regular trading session, with its stock price having risen by more than 7% by noon. The driving force behind this action was Morgan Stanley initiating coverage on the company with an ‘Overweight’ rating and a price target of $59, which provides an upside of 47.5% to the current trading levels.

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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 top healthcare fund with the knowledge and resources of Orbimed Advisors or Baker Bros. Advisors 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. Since officially launching our small-cap strategy in August 2012 it has performed just as predicted, beating the market by over 60 percentage points and returning 118%, while hedge funds themselves have collectively underperformed the market (read the details here).

Psoriasis is an autoimmune skin disease characterized by long lasting lesions. XenoPort, Inc. (NASDAQ:XNPT)’s Chief Medical Officer Richard Kim expanded on the significance of the company’s XP23829 treatment, a monomethyl fumarate prodrug that could have remedial effects on the lesions as opposed to dimethyl fumarate, which is currently being prescribed for the ailment. XP23829 managed to meet endpoints for both a once-a-day 800 milligram dose, and a twice-a-day 400 milligram dose. According to XenoPort, Inc., XP23829 is also generally safe and well tolerated. Before the start of trading today, XenoPort’s stock had depreciated by more than 23% on a year-to-date basis.

Professional money managers were generally bearish towards the company during the second quarter, as just 16 funds in our database had an aggregate investment of $106.80 million in the company compared to 20 funds with $115.91 million in it on March 31. However, the funds did hold 27.8% of the company’s outstanding shares. Julian Baker and Felix Baker‘s Baker Bros. Advisors and Samuel Isaly‘s Orbimed Advisors are the two largest stockholders of XenoPort, Inc. (NASDAQ:XNPT) within our database, with respective holdings of 6.51 million shares valued at $39.90 million and 5.77 million shares valued at $35.36 million.

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