Is Redmile Group Right to Bet on Array Biopharma Inc (ARRY), Amicus Therapeutics, Inc. (FOLD) & Two Other Stocks?

Despite of all the negative sentiment looming around them, hedge funds had a pretty solid run for much of this year, generating positive returns for seven or eight consecutive months (depending on the source) before that streak came to an end in October. The third-quarter was a particularly strong one for the industry, as evidenced by our own data. 659 funds in our system which filed for the June 30 13F reporting period held long positions in at least 5 non-micro-cap stocks, and those funds’ long bets posted 8.3% gains in the third-quarter based on the size of their positions on June 30. That easily bested the performance of S&P 500 ETFs, which returned only 3.3% for the period. Where hedge funds tend to falter is on the other positions in their portfolios (options plays, bonds, etc.), which are there to limit downside risk, but also limit upside potential. That’s why we recommend investors consider hedge funds’ top long bets and share them with readers throughout the year. In this article, we’ll analyze the top picks and performance of Redmile Group.

Redmile Group is a San Francisco-based hedge fund managed by Jeremy Green. Redmile’s equity portfolio appreciated to $1.26 billion from $1.05 billion during the third quarter. The fund’s 26 long positions in companies with a market cap of at least $1.0 billion had a weighted average return of 11.82% in the third quarter, based on the size of those positions at the end of June. In this article, we will take a closer look at some of the fund’s top picks, including Array Biopharma Inc (NASDAQ:ARRY), Amicus Therapeutics, Inc. (NASDAQ:FOLD), Penumbra, Inc (NYSE:PEN), and Endologix, Inc. (NASDAQ:ELGX).

Redmile Group had over 19.15 million shares of Array Biopharma Inc (NASDAQ:ARRY) worth $68.18 million at the end of the second quarter, but cut the stake by 13% to 16.66 million shares in the following three months. However, amid a whopping 89.6% surge registered by the stock in the third quarter, the value of the holding amounted to $112.44 million at the end of September. Heading into the third quarter of 2016, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, down by 15% from the first quarter. Trailing Redmile Group was OrbiMed Advisors, which had a $39.1 million position in Array Biopharma at the end of June. Other investors bullish on the company included Deerfield Management, Biotechnology Value Fund / BVF Inc, and Baker Bros. Advisors.

Another investment that paid off for Redmile Group in the third quarter was its stake in Amicus Therapeutics, Inc. (NASDAQ:FOLD), in which the fund held 11.10 million shares worth $60.64 million at the end of June and it increased the position by 14% to 12.75 million shares in the third quarter. The value of the stake also jumped to $94.36 million, as the stock gained 35.5% between July and September. Amicus Therapeutics, Inc. (NASDAQ:FOLD) was included in the equity portfolios of 23 funds from our database at the end of June, down from 23 funds a quarter earlier. The largest stake in Amicus Therapeutics, Inc. (NASDAQ:FOLD) was held by Perceptive Advisors, which reported holding $83.2 million worth of stock as of the end of June. Other investors bullish on the company included Sectoral Asset Management, Palo Alto Investors, and venBio Select Advisor.

Redmile Group sold 31% of its stake in Penumbra Inc (NYSE:PEN) in the second quarter and further cut it by 22% in the third quarter. In this way, the fund held 672,918 shares worth $51.14 million at the end of September, compared to 863,581 shares worth $51.38 million at the end of June. In the third quarter, Penumbra’s stock advanced by 27.7%. During the second quarter, the number of funds from our database long Penumbra Inc (NYSE:PEN) rose by 18% to 13. Redmile was the largest shareholder among them, followed by Consonance Capital Management, which held $40.7 million worth of shares at the end of June. Moreover, Rock Springs Capital Management, Renaissance Technologies, and D E Shaw were also bullish on Penumbra Inc (NYSE:PEN).

After having boosted its position by 1.49 million shares to 3.96 million shares worth $49.37 million in the second quarter, Redmile Group trimmed the stake in Endologix, Inc. (NASDAQ:ELGX) by 12% during the third quarter to 3.48 million shares valued at $44.55 million at the end of September. Last quarter, shares of Endologix inched up by 2.7%. Endologix, Inc. (NASDAQ:ELGX) was included in the portfolios of 24 followed by our team at the end of June, up by two over the quarter. The largest stake in Endologix, Inc. (NASDAQ:ELGX) was held by Cadian Capital, which reported holding $50.3 million worth of stock as of the end of June. It was followed by Redmile Group with a $49.4 million position. Other investors bullish on the company included Camber Capital Management, Tamarack Capital Management, and Partner Fund Management.

Disclosure: none