According to a recent filing with the Securities and Exchange Commission, Stephen DuBois‘s Camber Capital Management initiated a position in the newly-listed clinical-stage biopharmaceutical company, Catabasis Pharmaceuticals Inc (NASDAQ:CATB), reporting ownership of some 928,746 shares that are valued at $13.0 million based on the current stock price. The holding represents about 6.38% of the company’s outstanding shares.
Stephen DuBois launched Camber in 2006 with the intention to focus on the healthcare sector. The fund employs a bottom-up stock picking approach to hunt for value stocks in the micro-cap and small-cap universe. Regulatory assets under the fund’s management currently stand at $2.21 billion while the market value of its public equity portfolio stood at $1.4 billion at the end of March. The healthcare sector represented 81% of the holdings, while the rest was represented by the finance sector.
First a quick word on why we track hedge fund activity. In 2014, equity hedge funds returned just 1.4%. In 2013, that figure was 11.3%, and in 2012, they returned just 4.8%. These are embarrassingly low figures compared to the S&P 500 ETF (SPY)’s 13.5% gain in 2014, 32.3% gain in 2013, and 16% gain in 2012. Does this mean that hedge fund managers are dumber than a bucket of rocks when it comes to picking stocks? The answer is definitely no. Our small-cap hedge fund strategy, which identifies the best small-cap stock picks of the best hedge fund managers returned 28.2% in 2014, 53.2% in 2013, and 33.3% in 2012, outperforming the market each year (it’s outperforming it so far in 2015 too). What’s the reason for this discrepancy you may ask? The reason is simple: size. Hedge funds have gotten so large, they have to allocate the majority of their money into large-cap liquid stocks that are more efficiently priced. They are like mutual funds now. Consider Ray Dalio’s Bridgewater Associates, the largest in the industry with about $165 billion in AUM. It can’t allocate too much money into a small-cap stock as merely obtaining 2% exposure would really move the price. In fact, Dalio can’t even obtain 2% exposure to many small-cap stocks, even if he essentially owned the entire company, as they’re simply too small (or rather, his fund is too big). This is where we come in. Our research has shown that it is actually hedge funds’ small-cap picks that are their best performing ones and we have consistently identified the best picks of the best managers, returning 135% since the launch of our small-cap strategy compared to less than 55% for the S&P 500 (see the details).
Catabasis Pharmaceuticals Inc (NASDAQ:CATB) develops novel therapeutics based on its proprietary Safely Metabolized And Rationally Targeted, or SMART, linker technology. The concept is based on treating diseases by simultaneously modulating multiple biological targets in one or more related disease pathways. Initially the company is focusing on rare diseases such as Duchene muscular dystrophy, DMD, which affects about 1 in 3,600 boys and results in muscle degeneration and premature death. In this regard Catabasis Pharmaceuticals Inc (NASDAQ:CATB)’s treatment for DMD, CAT-1004 recently got a breakthrough as the Food and Drug Administration (FDA) bestowed Fast Track designation on the drug owing to promising pre-clinical studies.