There are not many signals at the moment that suggest a continuation of the so-called “correction”, except for the potential letdown of the current earnings report season. The worries about China’s economic slowdown have already been consumed, so most market participants have regained their confidence in the U.S equity markets. The following article will discuss two such bullish moves made by two elite hedge funds monitored by the Insider Monkey team. In a freshly-filed 13G with the SEC, James E. Flynn’s Deerfield Management reported an ownership stake of 750,326 shares in Adeptus Health Inc. (NYSE:ADPT), which accounts for 5.40% of the company’s outstanding common stock. This denotes a lift of 386,326 shares from the position disclosed in the firm’s 13F filing for the June quarter. A separate 13G filing revealed that Tiger Global Management, founded by Chase Coleman, holds 4.24 million Class B shares and exactly 1 million Class A shares of Pure Storage Inc. (NYSE:PSTG), which represent 17.9% of its outstanding shares. The Class B common stock may be converted into Class A common stock at a 1:1 ratio. Tiger Global acquired the Class A shares on October 7 through the company’s initial public offering.
Professional investors like Flynn and Coleman spend considerable time and money conducting due diligence on each company they invest in, which makes them the perfect investors to emulate. However, we also know that the returns of hedge funds on the whole have not been good for several years, underperforming the market. We analyzed the historical stock picks of these investors and our research revealed that the small-cap picks of these funds performed far better than their large-cap picks, which is where most of their money is invested and why their performances as a whole have been poor. Why pay fees to invest in both the best and worst ideas of a particular hedge fund when you can simply mimic the best ideas of the best fund managers on your own? A portfolio consisting of the 15 most popular small-cap stock picks among the funds we track has returned 102% and beaten the market by more than 53 percentage points since the end of August 2012 (see the details).
Deerfield Management is a New York-based hedge fund launched with $17 million in capital in 1994. The investment management firm, with assets under management in excess of $5 billion, focuses solely on the healthcare industry. Deerfield Management was established by Arnold Snider, who stepped down back in 2005 and left the managing director role to James Flynn. As stated by the aforementioned 13F filing for the June quarter, the investment firm manages an equity portfolio worth $3 billion as of June 30.
Adeptus Health Inc. (NYSE:ADPT), the largest operator of freestanding emergency rooms in the Unites States, has seen its shares advance by 130% this year. Nonetheless, the recent market volatility has made the stock more attractive relative to the share price it was trading at around the beginning of August. The company’s incredible stock performance can be attributed to its growth initiatives. Adeptus Health opened 15 new facilities in the first half of the year, which include 14 freestanding emergency facilities and its first hospital. At the same time, the company is anticipated to generate profit in 2015 for the first time in the past few years. Analysts surveyed by Thomson Reuters expect earnings per share of $1.22 for fiscal 2015 and $2.11 for 2016. It is highly likely that Adeptus Health will meet analysts’ estimates, as it reported adjusted earnings per share of $0.16 in the first quarter and $0.44 in the second.
Meanwhile, the stock became more attractive within the hedge fund industry, as the number of top money managers invested in it increased to 20 from 11 during the second quarter. These hedge funds stockpiled 6.80% of the company’s shares at the end of June. Similarly, the value of their investments increased to $134.16 million from $38.95 million quarter-over-quarter. Israel Englander’s Millennium Management holds roughly 266,000 shares of Adeptus Health Inc. (NYSE:ADPT) as of June 30.
On the second page of the article we will be discussing the move made by Tiger Global Management.