Edwards Lifesciences Corp (EW), QUALCOMM, Inc. (QCOM): David Blood and Al Gore Bet Big on Healthcare and Tech

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Edwards Lifesciences Corp (NYSE:EW) was one of the top gainers in Monday trading and closed 9% in green after it reported that 30-day outcomes for high- and intermediate-risk patients treated with its SAPIEN 3 transcatheter aoirtic valve showed the lowest all-cause mortality rates of any of the PARTNER studies. The stock of the developer of technologies for the treatment of heart diseases is already up by 109% over the last 52 weeks and it attracts more and more attention from investors. One of the funds that will beneift the most from Edwards’ growth is David Blood and Al Gore‘s Generation Investment Management, which holds around 4.19 million shares of the company; the $553.61 million stake is the fund’s second largest in terms of value. Moreover, Generation is one of the largest shareholders of Edwards Lifesciences Corp (NYSE:EW) among institutional investors.

David Blood

As the company added in its statement, its SAPIEN 3 valve is the most advanced transcatheter aortic valve and is scheduled for launch in early 2016. Edwards Lifesciences Corp (NYSE:EW)’s stock gained around 16% since the beginning of the year, amid the compay reporting great financial results for the fourth quarter and full year 2014. Due to a high demand of heart valves, its revenue in the fourth quarter surged to $618 million, from $536 million a year earlier. Moroever, for the full year, the revenue appreciated by around 13% on the year to $2.32 billion. The revenue growth during the last year, helped Edwards Lifesciences to drive its profits higher to $7.48 per diluted share, versus $3.44 per share in 2013. For the current year, the company expect diluted EPS between $4.00 and $4.30, excluding special items, versus reported $3.50 for 2014.

Generation Investment Management (GIM) is a long-only equity fund that invests with a long-term horizon. Messrs. Blood and Gore are focused on investing in companies that are socially and environmentally responsible and sport good corporate governance policies. Prior to founding GIM, Mr. Blood worked as Chief Executive Officer of Goldman Sachs Asset Management. Mr. Gore is a former Vice President of the United States and works one day a week for the fund, being also engaged in several philantropic and environmental projects.

At the end of 2014, GIM reported an equity portfolio valued at $6.96 billion, with a strong focus on Technology and Healthcare stocks, which in aggregate represent almost 80% of the total value. The fund’s bullish sentiment towards these sectors can also be observed from taking a look at the fund’s larges holdings, top three of which are represented by Check Point Software Technologies Ltd. (NASDAQ:CHKP)Edwards Lifesciences Corp (NYSE:EW), and QUALCOMM, Inc. (NASDAQ:QCOM).

However, investing in the same companies in which GIM has its largest stakes might not be a good idea for retail investors. If we take a look at average returns of equity hedge funds in the last three years, we can see that they returned around 1.4% in 2014, 11.1% in 2013, and 4.8% in 2012. This returns are very low in comparison with the S&P 500 ETF (SPY), which appreciated by 13.5%, 32.3% and 16% during the same years. However, this low performance is mainly due to the fact that the majority of large hedge funds invest in large-cap stocks, as our backtests showed that an equally weighted portfolio that consists of 50 most popular picks among hedge funds underperformed the market by around 7.0 basis points per month between 1999 and 2012. On the other hand, our small-cap strategy, based on most popular stocks with market cap between $1.0 and $5.0 billion among over 700 hedge funds, returned 132% between August 2012 and March 2015, outperforming the market by over 79 percentage points.

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