Most investors monitor hedge funds’ 13F filings in order to identify high-potential stocks, and our research has provided evidence that these public filings bury inside numerous stock winners indeed. However, there is a camp of stock market participants that doubts the usefulness of these delayed filings. If one resides this camp of skeptics, he/she can turn his/her attention to the spontaneous 13G and 13D filed with the SEC. The likelihood of stumbling upon great stock picks in these filings is very high, and there is even a mutual fund (13D Activist Fund that tracks activist investors) proving that hedge funds do have strong stock picking skills.
Let’s first take a step back and analyze how tracking hedge funds can help an everyday investor. Through our research, we discovered that a portfolio of the 15 most popular small-cap picks of hedge funds beat the S&P 500 Total Return Index by nearly a percentage point per month on average between 1999 and 2012. On the other hand the most popular large-cap picks of hedge funds underperformed the same index by seven basis points per month during the same period. This is likely a surprise to many investors, who think of small-caps as risky, unpredictable stocks and put more faith (and money) in large-cap stocks. In forward tests since August 2012 these top small-cap stocks beat the market by an impressive 53 percentage points, returning over 102% (read more details here). Follow the smart money into only their best investment ideas all while avoiding their high fees.
According a freshly-submitted 13D filing with the SEC, biotech-focused Baker Bros. Advisors LP, founded by Julian and Felix Baker, currently owns a stake of 14.33 million shares in BioCryst Pharmaceuticals Inc. (NASDAQ:BCRX). This compares to the 11.58 million-share position revealed via the June round of 13F filings. The recently-upped stake accounts for a whopping 19.5% of the biotech’s outstanding shares. As stated by the aforementioned public filing, Baker Bros. Advisors, which holds these shares for investment purposes only, might make suggestions to the company’s management regarding financing, but may also change their present intentions. It appears that this activist filing stands behind the stock’s surge of more than 4% in Friday’s post-market trading session. Meanwhile, the drug maker that develops novel small molecule drugs aimed at blocking key enzymes involved in rare diseases has seen its shares drop 24% year-to-date.
The biotech stock received more attention from the hedge funds monitored by the Insider Monkey team during the second quarter. The number of hedge funds invested in BioCryst Pharmaceuticals Inc. (NASDAQ:BCRX) increased to 25 from 16 quarter-over-quarter, accumulating 31.80% of the company’s shares. Similarly, the value of their investments increased to $343.28 million from $234.51 million during the three-month period. Peter Kolchinsky’s RA Capital Management held a 2.61 million position in BioCryst Pharmaceuticals Inc. (NASDAQ:BCRX) at the end of the second quarter.
The next page of the article reveals two other moves made by Atlantic Investment Management and Ashe Capital Management LP.