There probably is no other sector that has burned hedge funds this year as bad as healthcare has. Though the decline in the sector started in the second-half of 2015 itself, it was only this year that several prominent names in the industry saw their stocks falling to record lows. However, very few hedge funds saw that coming and a lot of them bet heavily on healthcare stocks going into 2016. Taking into account the turmoil in the sector, we thought of compiling a list of stocks from the healthcare and pharmaceutical space that were popular among the over 800 hedge funds we cover at the end of last year, but have disappointed those funds this year by slumping hard. In this article, we will focus on the five healthcare stocks that topped our list.
We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).
#5 Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX)
– Investors with Long Positions (as of December 31): 48
– Aggregate Value of Investors’ Holdings (as of December 31): $1.50 billion
Although the ownership of Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) among funds covered by us inched down by three during the fourth quarter, the aggregate value of their holdings saw an increase of 6.8% during the same period. Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX)’s stock fell significantly in January tand ended the first quarter down by 36.8%. Among the funds that managed to safeguard themselves from large losses ahead of this decline was Ken Griffin‘s Citadel Investment Group, which reduced its stake in the company by 70% to 708,486 shares during the fourth quarter. Despite the poor performance of the stock this year, several analysts feel that it will rebound in the coming months because of the rising sales of the two drugs ‘Kalydeco’ and ‘Orkambi’ that the company currently has in the market and the likelihood of FDA approving two other drugs by the company, which are currently in Phase 3 development. Vertex Pharmaceuticals Incorporated reported non-GAAP quarterly profits for the first time in its last earnings release, which is another reason why most analysts have a positive outlook on the stock. On April 10, analysts at Leerink Swann reiterated their ‘Outperform’ rating on the stock.