Huge Jumps In Hedge Fund Popularity For These 5 Healthcare Stocks

Biotechs have had a very tough year, though the healthcare sector as a whole has managed to rebound into the green year–to-date. While the iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB) has lost almost 16% year-to-date, the Health Care SPDR (ETF) (NYSEARCA:XLV) has gained 1.22% over the year, and more than 2.6% since the end of the second quarter.

In this article, we’ll take a look at five healthcare stocks that saw their popularity among hedge funds increase substantially during the second quarter, based on the 13F filings from 749 hedge funds and other institutional investors in our database, as volatility reigned over the space.

At Insider Monkey, we track around 750 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details).

#5. STERIS plc Ordinary Shares (NYSE:STE)

– Number of Hedge Funds With Long Positions (as of June 30): 30

– Aggregate Value of Hedge Funds’ Holdings (as of June 30): $647.3 million

Let’s start with STERIS plc Ordinary Shares (NYSE:STE), in which the number of hedge funds in our database long its stock surged by more than 57% during the second quarter. Among the largest shareholders was David Cohen and Harold Levy’s Iridian Asset Management, which held 4.1 million shares, or $282 million in stock as of June 30. Among new shareholders was Jim Simons’ Renaissance Technologies, which opened a position comprising 637,000 shares on June 30.

Since the second quarter ended, shares of STERIS plc Ordinary Shares (NYSE:STE) have gained 4.1%, even though they’ve trended down since August 9, following the announcement of the company’s first quarter of fiscal year 2017 results. While EPS of $0.79 beat the Street’s consensus target by $0.02, revenue of $638.4 million fell $640,000 short of expectations. On Friday, shares traded up by 1% as the stock went ex-dividend; shareholders of record as of August 30 will receive a quarterly dividend of $0.28 per share. In addition to hedge funds jumping into this stock in the second quarter, Barron’s also recently ranked it as one of three small-cap stocks worth buying.

#4. Boston Scientific Corporation (NYSE:BSX)

– Number of Hedge Funds With Long Positions (as of June 30): 47

– Aggregate Value of Hedge Funds’ Holdings (as of June 30): $2.07 billion

Next up is Boston Scientific Corporation (NYSE:BSX), which witnessed a 34% increase in hedge fund support over the second quarter, as the stock gained more than 24% during the period. Notable investors included Ken Griffin’s Citadel Advisors, which boosted the size of its position by more than 1,500% during the quarter to 14.69 million shares valued at $343 million, and Israel Englander’s Millennium Management, with 12.79 million shares as of June 30.

Since the end of the second quarter, Boston Scientific Corporation (NYSE:BSX) shares have risen by 3.2%, most recently helped by a revenue beat posted in late-July. Second quarter EPS of $0.27 was in-line with expectations, but revenue of $2.13 billion came in $80 million ahead of estimates. On Friday, optionMONSTER reported a marked increase in September 24 call options purchases, which suggests traders are expecting a rally in the weeks to come.

We’ll check out three more healthcare stocks that hedge funds loved during the second quarter on the second page of this article.

#3. Shire PLC (ADR) (NASDAQ:SHPG)

– Number of Hedge Funds With Long Positions (as of June 30): 64

– Aggregate Value of Hedge Funds’ Holdings (as of June 30): $3.77 billion

Shire PLC (ADR) (NASDAQ:SHPG) experienced a significant second quarter increase in the number of hedge funds long its stock, as the figure rose by 15 to 64 on June 30. Large shareholders included Andreas Halvorsen’s Viking Global with 1.16 million shares and Dan Loeb’s Third Point, which started a new stake in the company comprising 950,000 shares.

Shire PLC (ADR) (NASDAQ:SHPG) has lost more than 7.4% since the beginning of the year, but has gained more than 5% since the third quarter started. In early-2016, the company announced its $32 billion acquisition of Baxalta, which was completed in June, creating the biggest rare-disease drugmaker in the world. Now, rumors about a new acquisition have surfaced. Chatter suggests the firm recently made an $800 million bid for another rare diseases-focused biopharmaceutical, Raptor Pharmaceuticals (NASDAQ:RPTP), which sent shares up on the rumors.

#2. Medivation Inc (NASDAQ:MDVN)

– Number of Hedge Funds With Long Positions (as of June 30): 65

– Aggregate Value of Hedge Funds’ Holdings (as of June 30): $2.83 billion

After an increase in hedge fund support of more than 32% between April and June, Medivation Inc (NASDAQ:MDVN) counted 65 hedge fund shareholders from our database, which held more than 28% of its float at the end of June. One of the newcomers was Jason Karp’s Tourbillon Capital Partners, which purchased 4.72 million shares (or more than 2.8% of the company’s outstanding shares) in the second quarter. Similar was the case of Eric Mindich’s Eton Park Capital, as the fund bought 3.08 million shares, or roughly $185 million in stock during the quarter.

Medivation Inc (NASDAQ:MDVN)’s stock has spiked by more than 66% year-to-date, and hedge funds have scored big on their second quarter investment, as shares have gained more than 31.5% in the third quarter. Over the last weekend, shares skyrocketed after the announcement that Pfizer Inc. (NYSE:PFE) was acquiring the company for $81.50 per share, in a deal valued at approximately $14 billion. The deal is expected to close by the fourth quarter of this year.

#1. Biogen Inc (NASDAQ:BIIB)

– Number of Hedge Funds With Long Positions (as of June 30): 73

– Aggregate Value of Hedge Funds’ Holdings (as of June 30): $4.04 billion

Finally, there’s Biogen Inc (NASDAQ:BIIB), in which the number of hedge funds in our database long its stock rose to 73 from 64 during the second quarter. One of the largest new positions was that of Arthur B Cohen and Joseph Healey’s Healthcor Management LP, which acquired 475,000 shares of the company during the quarter.

Shares of Biogen Inc (NASDAQ:BIIB) are relatively flat year-to-date, but have gained 29% since the beginning of the third quarter, largely helped by rumors about a potential takeout from Allergan plc Ordinary Shares (NYSE:AGN) or Merck & Co., Inc. (NYSE:MRK).

Disclosure: Javier Hasse holds no interest in any of the securities or entities mentioned in this article.