HealthCor Management’s Core Health Picks For Q3

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Healthcor Management LP is a New York-based healthcare-focused hedge fund founded by Arthur Cohen and Joseph Healey in 2005. Prior to forming the fund, both Cohen and Healey worked for Steve Cohen’s SAC Capital Advisors. Between 1995 and 2000, Cohen also served as the Managing Director at Julian Robertson’s Tiger Management, managing the healthcare investments of the fund. Healthcor Management LP recently filed its 13F with the SEC for the  June 30 reporting date. According to the filing, Healthcor’s U.S public equity portfolio was worth over $1.98 billion at the end of June, with 90% of its holdings being in the healthcare sector. The fund had a very high turnover of almost 110%, having sold out of its stakes in 35 stocks, which initiating new positions in 23 stocks. In this article we are going to focus on Healthcor’s top three equity holdings at the end of the second quarter, which are also its top healthcare picks. They are Edwards Lifesciences Corp (NYSE:EW), HCA Holdings Inc (NYSE:HCA), and Mallinckrodt PLC (NYSE:MNK).

Arthur B Cohen and Joseph Healey

But why do we track hedge fund activity? From one point of view we can argue that hedge funds are consistently underperforming when it comes to net returns over the last three years, when compared to the S&P 500. But that doesn’t mean that we should completely neglect the hedge funds’ activities. There are various reasons behind the low hedge fund returns. Our research indicated that hedge funds’ long positions actually beat the market. In our back-tests covering the 1999-2012 period hedge funds’ top small cap stocks edged the S&P 500 index by double digits annually. The 15 most popular small cap stock picks among hedge funds also bested passive index funds by around 60 percentage points over the 35 month period beginning in September 2012, returning 118% (read the details here).

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Healthcor increased its position in Edwards Lifesciences Corp (NYSE:EW) by 340% to 1.1 million shares during the April-June period. As of June 30, this stake was worth $156.67 million. Edwards Lifesciences Corp (NYSE:EW) is a developer and manufacturer of heart valve systems . The company came out with better-than-expected second quarter results on July 28. It reported EPS of $1.13 on revenue of $616.80 million, compared to EPS of $1.05 on revenue of $604.97 million that the Street was expecting. On August 10 analysts at Credit Suisse reiterated their ‘Buy’ rating on the stock, while upping their price target to $162 from $150, which represents upside potential of about 13% over the current share price. Apart from Healthcor, another hedge fund that was bullish on the stock during the second quarter was Ken Griffin‘s Citadel Investment Group, which increased its stake in Edwards Lifesciences Corp (NYSE:EW) by 219% to almost 1.25 million shares.

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