Kevin Kotler‘s healthcare fund Broadfin Capital, the top performing fund in our database this year based on the calculated returns of its public equity positions in companies with a $1 billion+ market cap, has had it with the childish gamesmanship of Cardica, Inc. (NASDAQ:CRDC)‘s Board of Directors. According to a recent filing with the SEC, the fund is going to issue a proxy statement and an accompanying proxy card at the upcoming shareholders meeting in order to solicit votes for the nomination of eight candidates for election to Cardica’s Board of Directors. Broadfin owns about 8.87 million shares of Cardica, which when combined with certain shares of the company’s preferred stock that the fund holds together with its nominees, accounts for nearly 21.2% of the company’s shares.
After working for The Galleon Group, ABN AMRO, and ING Barings, Kotler founded Broadfin Capital in June 2005. According to Symmetric.io, Broadfin ranks at the top among hedge funds as far as stock picking for the last three years is concerned. Most of Broadfin’s major holdings are in the small-cap biotechnology space. The market value of the fund’s public equity portfolio currently stands at about $1.86 billion with 80% of those investments in the healthcare sector. Another 14% belong to the finance sector.
We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular small-cap stock picks in real time since the end of August 2012. These stocks have returned 118% since then and outperformed the S&P 500 Index by around 60 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.
Hedge funds have generally stayed put with their investments in Cardica, Inc. (NASDAQ:CRDC) during the April-June quarter, even though the healthcare company’s stock price depreciated by about 23% during this period. Among the funds that we track, six had an aggregate investment of $13.05 million in the company at the end of June compared to seven firms with $16.37 million in shares at the end of March. Stephen Dubois‘ Camber Capital Management was the second-largest stockholder of the company among these after Broadfin, holding some 8.37 million shares valued at $4.18 million.