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Hedge Fund Interview Series: Michael Castor of Sio Capital

We are planning to interview several hedge fund managers over the next few months and picked Michael Castor as our first “victim”. I have been following Michael Castor since 2013 when his fund had only $30 million in assets under management. I recognized his true talent and started sharing his stock picks in our premium monthly newsletter.

Most equity hedge funds aren’t truly hedge funds. They are almost never 100% hedged. That’s because they can’t generate pure alpha high enough to justify their 2-and-20 fee structure. A typical hedge fund manager these days can outperform the market by an average of 2-3 percentage points in its long portfolio. So, if the market returns 10%, a typical hedge fund will probably return 12-13%. This isn’t bad, but no investor in their right mind would pay 2% fixed annual fee plus a 20% performance fee for such a performance (the net return would fall to 8% after these outrageous fees). So, they try to confuse investors by reducing their net exposure to 50% and claiming that what they return is pure alpha.

Michael Castor isn’t like this. On average his portfolio has been actually 5-10% net short over the last 7-8 years. His fund returned more than 11% annually over this period and all of this is pure alpha. There are very few hedge fund managers left who can deliver this type of alpha over very long periods of time.  In the first half of this video we talked about Sio Capital, markets, and the coronavirus pandemic. Michael Castor doesn’t think Gilead Sciences Inc. (NASDAQ:GILD) is a good investment above $80 because he doesn’t think Gilead Sciences’ remdesivir is likely to be a meaningful therapy for the treatment of COVID-19.

The second half of the video was dedicated to Michael Castor’s opinions on most of the large healthcare stocks. He also shared his best U.S. and European healthcare stock ideas with us. We have been recommending a position in his top U.S. healthcare stock pick in our monthly newsletter, so I had to cut that part of the video out. However, you can still find out his top European healthcare stock pick which he expects to double. You can watch the video below and don’t forget to subscribe:

If you are interested in finding out Michael Castor’s top healthcare stock pick, please subscribe to our monthly newsletter. The portfolio of our stock recommendations in the monthly newsletter returned 71.8% since March 2017 (through April 28th) vs. 27.9% gain for the S&P 500 ETFs. There aren’t a lot of fund managers whose picks beat the market by 44 percentage points in the last 3 years.

Disclosure: None. This article is originally published at Insider Monkey.

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