Founded by Paul Sinclair in August 2014, Blue Jay Capital Management is a healthcare-focused hedge fund based in California. Prior to founding Blue Jay Capital (named after Canada’s only current Major League Baseball team, the Toronto Blue Jays), Mr. Sinclair founded and ran another healthcare-focused hedge fund Expo Capital Management (named after the former Canadian MLB team the Montreal Expos, which moved to Washington after the 2004 season to become the Nationals), which he closed down in 2012 amid the European sovereign debt crisis and after posting negative returns between 2011 and 2012.
Though Blue Jay Capital currently manages regulatory assets worth over $460 million, its latest 13F filing shows that less than one-third of those assets, or $152.28 million, was invested in public U.S. equities at the end of the second quarter. The filing also revealed that during the second quarter, the fund’s equity portfolio experienced a very high quarterly turnover rate of 128.57% and that it was considerably top-heavy at the end of June, with the fund’s top-5 holdings amassing over 40% of the value of its equity portfolio. In this article, we will take a look at those five stocks on which Blue Jay Capital Management was betting heavily on for big returns.
We believe that imitating hedge funds and other large institutional investors can be helpful in identifying stocks capable of outperforming the broader market. Through extensive research that covered portfolios of several hundred large investors between 1999 and 2012, we determined that following the small-cap stocks that large money managers are collectively bullish on, can generate monthly returns nearly 1.0 percentage points above the market (see the details here).
#5. Masimo Corporation (NASDAQ:MASI)
– Shares Owned by Blue Jay Capital Management (as of June 30): 218,960
– Value of Holding (as of June 30): $11.5 Million
Blue Jay Capital Management increased its stake in Masimo Corporation (NASDAQ:MASI) by 43% during the second quarter, which pushed the company to the fifth spot in the fund’s portfolio at the end of June, from the 13th spot at the end of March. The medical technology company has reported solid numbers for its past two quarters, causing its stock to appreciate significantly, as it now trades with year-to-date gains of 40.15%. The stock recently made its lifetime high at $60.46 and is currently trading very close to it. For its fiscal year 2016 third quarter, analysts are expecting the company to report EPS of $0.42 on revenue of $165.51 million. For the same quarter of the previous year, Masimo Corporation (NASDAQ:MASI) pulled in EPS of $0.36 on revenue of $152.57 million. The number of hedge funds in our system that were long Masimo inched up by one during the second quarter, while the aggregate value of their holdings in it rose by $4.6 million to almost $131 million.
#4. BioMarin Pharmaceutical Inc. (NASDAQ:BMRN)
– Shares Owned by Blue Jay Capital Management (as of June 30): 152,253
– Value of Holding (as of June 30): $11.84 Million
BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) also jumped several spots in Blue Jay Capital’s equity portfolio during the second quarter, as the fund more than doubled its stake in the company during that time. Other hedge funds that also upped their stakes in the company significantly during the second quarter included Anand Parekh‘s Alyeska Investment Group and Sander Gerber‘s Hudson Bay Capital Management. Up until last June, BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) was one of the most acclaimed names in the biotech space. However, the downturn in the sector since then has taken a heavy toll on BioMarin Pharmaceutical’s stock and it currently trades down by 7.4% year-to-date. Earlier this month, the company submitted long-term efficacy data for its drug cerliponase alfa with the FDA, as requested by the agency, which showed a prolonged treatment effect in children with Batten disease. On September 16, analysts at Leerink Swann reiterated their ‘Outperform’ rating and $127 price target on the stock. At the end of June, 42 hedge funds that we track were long BioMarin Pharmaceutical, with the aggregate value of their holdings in it amounting to $1.50 billion.
Blue Jay Capital’s three favorite healthcare stocks are analyzed on the second page.