A Look at Top Picks of This Billion-Dollar Healthcare-Focused Fund

#3 GlaxoSmithKline plc (ADR) (NYSE:GSK)

Shares held (as of September 30): 2.28 million
Total Value (as of September 30): $87.77 million
Percent of Portfolio (as of September 30): 3.40%

Deerfield raised its stake in GlaxoSmithKline plc (ADR) (NYSE:GSK) by 65% to 2.28 million shares in the third quarter. Shares of the British company sport an attractive 5.84% dividend yield, and trade at 15.82 times forward earnings, lower than the S&P 500’s forward P/E of around 17. Hedge funds are becoming more optimistic on the drug company, as the number of funds long the stock (among those we track) increased by two quarter-over-quarter to 35 at the end of September. Among the believers is Ken Fisher’s Fisher Asset Management, with a holding of 11.53 million shares.

#2 NxStage Medical, Inc. (NASDAQ:NXTM)

Shares held (as of September 30): 6.32 million
Total Value (as of September 30): $99.64 million
Percent of Portfolio (as of September 30): 3.85%

NxStage Medical, Inc. (NASDAQ:NXTM)’s System One is the only FDA-approved portable hemodialysis system for home use. Studies show that more frequent dialysis from System One produces better healthcare outcomes than peritoneal dialysis. Due to strong System One sales, NXTM’s home division has grown by 15%+ per year for the last decade. Management anticipates the strong growth to continue and for the company to be profitable in three years. NXTM reported better-than-expected results for the third quarter, with a loss of $0.03 per share on revenue of $86.52 million, beating estimates by $0.05 and $4.46 million, respectively. Sales jumped by 14.9% year-over-year, driven by robust Home and Critical Care product demand. Because of the strong results, NXTM increased full-year 2015 revenue guidance to the range of $332 million to $333 million from the previous $324 million – $328 million range, and also trimmed its full year net loss estimate to between $15 million and $16 million from the previous guidance of $18 million – $20 million. However, when looking at other funds we track, we see that their interest in NxStage Medical declined in the third quarter, as 20 funds reported long positions in the company, compared to 30 a quarter earlier.