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Hedge Funds Were Right About Kythera Biopharmaceuticals Inc (KYTH), Rewarded with 48% Gains

Our hedge fund indicator was right about Kythera Biopharmaceuticals Inc (NASDAQ:KYTH) when it issued a buy signal based on recent activity. The number of bullish hedge fund bets in KYTH rose by 6 during the first quarter. KYTH was in 23 hedge funds’ portfolio at the end of March. There were 17 hedge funds in our database with KYTH holdings at the end of the previous quarter.

To the average investor there are a multitude of metrics stock market investors employ to assess their stock investments. A couple of the less utilized metrics are hedge fund and insider trading activity. Our research have shown that, historically, those who follow the top picks of the elite investment managers can trounce the market by a very impressive amount (see the details here). The 15 most popular small-cap stocks among hedge funds outperformed the market by double digits annually in our back tests. The performance of these stocks were even better since we started tracking them in real-time. Since the end of August 2012 these stocks beat the S&P 500 Index by nearly 20 percentage points per year.

Allergan Plc (NYSE:AGN) and Kythera Biopaharmaceuticals announced today that Allergan will acquire Kythera for $75 a share in a cash and stock transaction. The stock was trading at $50 just at the end of March. Hedge funds made 48% in 2.5 months. Let’s take a glance at the latest action surrounding Kythera Biopharmaceuticals Inc (NASDAQ:KYTH).

How have hedgies been trading Kythera Biopharmaceuticals Inc (NASDAQ:KYTH)?

Heading into Q2, a total of 23 of the hedge funds tracked by Insider Monkey were long in this stock, a change of 35% from the previous quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings considerably.

Of the funds tracked by Insider Monkey, William Leland Edwards’s Palo Alto Investors had the largest position in Kythera Biopharmaceuticals Inc (NASDAQ:KYTH), worth close to $69.3 million, amounting to 3.4% of its total 13F portfolio. On Palo Alto Investors’s heels is Partner Fund Management, managed by Christopher Medlock James, which held a $62.3 million position; 1.7% of its 13F portfolio is allocated to the company. Remaining hedgies that hold long positions include Samuel Isaly’s OrbiMed Advisors, Roberto Mignone’s Bridger Management and Arthur B Cohen and Joseph Healey’s Healthcor Management LP.

As aggregate interest increased, key money managers have jumped into Kythera Biopharmaceuticals Inc (NASDAQ:KYTH) headfirst. Bridger Management, managed by Roberto Mignone, initiated the biggest position in Kythera Biopharmaceuticals Inc (NASDAQ:KYTH). Bridger Management had 22.3 million invested in the company at the end of the quarter. Jeremy Green’s Redmile Group also made a $11.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management, Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management, and Curtis Schenker and Craig Effron’s Scoggin.

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