Biotech Guru Joseph Edelman‘s Perceptive Advisors is known for its long-short investment approach that focuses on biotech stocks. Edelman founded the fund in 1999 and performed exceptionally well in its first year, returning 129%. Over the years that the fund has been in operation, it has registered more gains than losses. In its 13F filing for the first quarter of 2015, Perceptive showed that it had an equity portfolio of $1.29 billion. Being one of the funds that we track, and being focused on the biotech sector, we took a keen interest in its top healthcare picks at the end of March, which include Amicus Therapeutics, Inc. (NASDAQ:FOLD), Neurocrine Biosciences, Inc. (NASDAQ:NBIX), and Retrophin Inc (NASDAQ:RTRX).
An everyday investor does not have the time or the required skillset to carry out an in-depth analysis of equities and identify companies with the best future prospects like a fund with the knowledge and resources of Perceptive 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 84 percentage points and returning over 144%, while hedge funds themselves have collectively underperformed the market (read the details here).
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Amicus Therapeutics, Inc. (NASDAQ:FOLD), a public biopharmaceutical company headquartered in Cranbury, New Jersey, came atop the list of Joseph Edelman’s healthcare picks heading into the second quarter of 2015. According to Perceptive Advisors’ 13F filing, it holds a total of 14.44 million shares valued at $157.10 million, representing 12.2% of its equity portfolio. During the quarter, the fund didn’t have much activity on the stock in terms of shares increase or reduction.