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Michael Castor’s Sio Capital Management’s New Bets For This Quarter

The New York-based healthcare fund Sio Capital Management was founded by Dr. Michael Castor in 2006 with an intention to use specialized knowledge of science and industry dynamics in order to identify mispriced stocks. The fund has investments across the healthcare board including pharmaceutical, insurance and biotech companies. In the October-December period the fund delivered 11.12% in returns, according to our calculations, which takes into account the fund’s long equity holdings in companies with a market capitalization of more than $1.0 billion. By the same measure Sio returned 7.4% in 2015, while most hedge funds delivered losses. Sio Capital held an equity portfolio worth $225.83 million at the end of last year, significantly higher than the $145.89 million reported a quarter earlier. A considerable portion of the increase in value comes from 20 new positions that the fund initiated between October and December and in this article we are going to assess Sio’s top five new positions, skipping Dyax Corp, in which the fund initiated a new stake that ranked as its second-largest, but which was acquired by Shire earlier this year.

We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space, where our research indicated that imitating the 15 most popular stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).

Michael Castor
Michael Castor
Sio Capital

#5 St. Jude Medical, Inc. (NYSE:STJ)

– Shares Owned by Sio Capital (as of December 31): 92,800

– Value of Holding (as of December 31): $5.73 Million

Sio’s newly initiated stake in the Saint Paul-based developer of medical devices hasn’t quite worked well for the firm yet as the stock is down by over 13% year-to-date despite being upgraded by Canaccord Genuity to ‘Hold’ from ‘Sell’ in February. The company recently received FDA approval for its St. Jude Medical Axium™ Neurostimulator System for dorsal root ganglion (DRG) stimulation, which provides pain relief for patients with chronic intractable pain conditions. David Stemerman‘s Conatus Capital Management also holds about 1.62 million shares of St. Jude Medical, Inc. (NYSE:STJ) valued at $100.2 million.

#4 CTI BioPharma Corp (NASDAQ:CTIC)

– Shares Owned by Sio Capital (as of December 31): 5.30 Million

– Value of Holding (as of December 31): $6.51 Million

Sio initiated a stake in the $150 million biopharmaceutical company during the fourth quarter, amid CTI BioPharma Corp (NASDAQ:CTIC)’s stock declining by 15.8% during this period. Shares of CTI slipped even further in February after FDA placed a full clinical hold on the Investigational New Drug application of the company’s lead product candidate pacritnib owing to the drug’s interim overall survival data. Furthermore, the company missed both the top and bottom line estimates in its financial results for the fourth quarter. Mark Lampert‘s Biotechnology Value Fund is the largest shareholder of CTI BioPharma Corp (NASDAQ:CTIC) within our database as it held nearly 43.8 million shares of the company at the end of December.

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#3 Vitamin Shoppe Inc (NYSE:VSI)

– Shares Owned by Sio Capital (as of December 31): 240,000

– Value of Holding (as of December 31): $7.85 Million

Sio’s position in Vitamin Shoppe Inc (NYSE:VSI) amassed 3.48% of its equity portfolio heading into 2016. Since FDA has started to glean dietary supplements, several companies, including Vitamin Shoppe, have come under fire, which is apparent from the stock losing almost 35% of its value in the last 12 months. Vitamin Shoppe’s CEO took over a non-executive role after Clint Carlson’s Carlson Capital disclosed an activist stake in the company about 10 months ago. While the $730 million vitamin manufacturer is trying to make a turnaround by improving customer experience and participating in local community events such as sporting competitions, the efforts have still not precipitated into substantially fattening its bottom line. Some of the company’s investors were hoping for a takeover from GNC Holdings Inc (NYSE:GNC), but that doesn’t seem to happen in the near future as GNC is unwilling to take on more debt in light of its own struggle. Carlson Capital held 2.27 million shares of Vitamin Shoppe at the end of December.

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