Johnson & Johnson (JNJ), ACADIA Pharmaceuticals Inc. (ACAD): Healthcare Experts at March Altus Like These and Other Healthcare Stocks’ Prospects

March Altus Capital Management is a Connecticut-based long/short equity hedge fund that primarily invests in healthcare stocks. The fund was started in 2012 by Neil Shah, a former healthcare manager at Shumway Capital Partners. According to March Altus Capital Management’s latest 13F filing, its U.S public equity portfolio was worth only $16 million at the end of September and 94% of it comprised stocks from the healthcare space. The fund runs a fairly concentrated portfolio, with only 11 long positions at the end of third quarter, four of which were new additions.

In this article, we’ll take a look at the top-5 stock picks of March Altus Capital Management, which accounted for over 70% of the value of the fund’s portfolio at the end of September.

– Related Reading: 10 Countries That Spend the Most on Healthcare

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 about our small-cap strategy).

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#5. DexCom, Inc. (NASDAQ:DXCM)

– Shares Owned by March Altus Capital Management (as of September 30): 14,200

– Value of the Holding (as of September 30): $1.24 Million

DexCom, Inc. (NASDAQ:DXCM) has been a part of March Altus’ equity portfolio since the fourth quarter of 2013. During the third quarter, the fund increased its stake in the company by 22%. The medical device company has lost a chunk of its market cap in the current quarter amid market-wide selling of diabetes-focused firms. Due to this recent decline, DexCom, Inc. (NASDAQ:DXCM)’s stock is currently trading down by 12.23% year-to-date. On Monday, analysts at Canaccord Genuity reiterated their ‘Buy’ rating on the stock and set a price target of $70 on it, which is slightly lower than the current trading price of its shares.

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#4. Johnson & Johnson (NYSE:JNJ)

– Shares Owned by March Altus Capital Management (as of September 30): 13,000

– Value of the Holding (as of September 30): $1.54 Million

March Altus Capital Management initiated its stake in Johnson & Johnson (NYSE:JNJ) during the second quarter and made no changes to it during the third quarter. Shares of the healthcare behemoth made their lifetime high at $126.07 earlier this year and are currently trading up by 13% year-to-date. Despite this rally, the stock still sports a decent forward yield of 2.76%. On November 12, the company issued a statement in which it revealed that its experimental sirukumab treatment for rheumatoid arthritis showed mixed results against AbbVie (NYSE:ABBV)’s top-selling drug Humira in a large trial. A number of analysts who track Johnson & Johnson (NYSE:JNJ) feel that it has limited upside, as it is trading above its estimated fair value of $112 per share.

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We’ll check out three more of the fund’s top healthcare stock picks on the next page.

#3. Aratana Therapeutics Inc (NASDAQ:PETX)

– Shares Owned by March Altus Capital Management (as of September 30): 218,515

– Value of the Holding (as of September 30): $2.04 Million

Moving on, Aratana Therapeutics Inc (NASDAQ:PETX) was also one of the top equity holdings of March Altus in which the fund kept its stake unchanged during the third quarter. The Kansas-based therapeutics company has seen its market cap increase by almost 40% so far in 2016, despite its stock taking a big hit in the current quarter. On November 3, Aratana Therapeutics Inc (NASDAQ:PETX) reported its third quarter results, declaring a loss of $0.38 per share on revenue of $0.04 million versus analysts’ expectations of a loss of $0.48 per share on revenue of $0.08 million.

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#2. ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD)

– Shares Owned by March Altus Capital Management (as of September 30): 72,723

– Value of the Holding (as of September 30): $2.31 Million

ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) was the only stock among March Altus’ top-5 stock picks in which the fund reduced its stake during the third quarter, by 12%. Like the other stocks discussed previously, ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD)’s stock also took a huge beating initially in the current quarter. However, it has changed its course since Donald Trump was elected as the incoming POTUS and is currently trading down by 20% year-to-date. On Tuesday, the company announced the initiation of ADVANCE, a Phase II study to evaluate its drug Pimavanserin for adjunctive treatment in patients with negative symptoms of schizophrenia. According to ACADIA, there is currently no drug approved by the FDA that treats these negative symptoms, which are found in almost half of the patients that suffer from schizophrenia. Last week, analysts at Goldman Sachs initiated coverage on ACADIA’s stock with a ‘Neutral’ rating and $28 price target.

#1. Edwards Lifesciences Corp (NYSE:EW)

– Shares Owned by March Altus Capital Management (as of September 30): 34,611

– Value of the Holding (as of September 30): $4.17 Million

A 20% rise in its stock during the third quarter coupled with March Altus increasing its stake in the company by 86% during the same period, pushed Edwards Lifesciences Corp (NYSE:EW) to the top spot in the fund’s portfolio at the end of September, up from the third spot at the end of June. Edwards Lifesciences Corp (NYSE:EW)’s stock has seen a massive rally since the start of 2014, rising from the mid-$30 level to above $120 earlier this year. However, that rally seems to have ended recently after the company reported its third quarter numbers on October 25 and its stock nosedived. Since the earnings release, the stock has declined by more than 20%, but is still trading up by 13.18% year-to-date. Several analysts who track Edwards Lifesciences think that the market has had a knee-jerk reaction to the company’s third quarter earnings and that this is an opportunity to buy the stock. On November 8, analysts at Northland Securities upgraded the stock to ‘Outperform’ from ‘Market Perform’ while keeping their price target on it unchanged at $105, suggesting potential upside of more than 16%.

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Disclosure: None