Jeremy Green, the manager of Redmile Group, is still bullish on Array Biopharma Inc (NASDAQ:ARRY) having further increased his holding of the stock. As reported in a recent Form 4 filing with the Securities and Exchange Commission (SEC), Redmile has acquired some 790,000 shares at prices varying between $5.32 and $5.45 per unit, and now holds just over 17.2 million shares. In a separate Form 4 filing, Neal C. Bradsher, the manager of Broadwood Capital, revealed the acquisition of 188,881 shares of STAAR Surgical Company (NASDAQ:STAA), a producer of implantable eye lenses and a company which ranks as one of the fund’s top positions. Shares were bought at prices ranging from $7.06 to $7.23 per share and, as a result, Broadwood Capital now has control over 8.33 million shares.
But why do we track hedge fund activity? From one point of view we can argue that hedge funds are consistently underperforming when it comes to net returns over the last three years, when compared to the S&P 500. But that doesn’t mean that we should completely neglect the hedge funds’ activities. There are various reasons behind the low hedge fund returns. Our research indicated that hedge funds’ long positions actually beat the market. In our back-tests covering the 1999-2012 period hedge funds’ top small cap stocks edged the S&P 500 index by double digits annually. The 15 most popular small cap stock picks among hedge funds also bested passive index funds by around 60 percentage points over the 35 month period beginning in September 2012, returning 118% (read the details here).
Based in San Francisco, California, Redmile Group focuses mainly on biotechnology stocks, although a significant part of the fund’s capital is currently invested in technology and financial stocks. The fund was founded in 2007 by Green and has grown to manage assets in excess of $1.2 billion. Array Biopharma Inc (NASDAQ:ARRY) is Jeremy Green’s top pick, with Redmile holding similar bets on Amicus Therapeutics, Inc. (NASDAQ:FOLD) and Valeant Pharmaceuticals Intl Inc (NYSE:VRX). According to the fund’s latest 13F filing, Green increased his investment in Valeant Pharmaceuticals during the second quarter by 44% to approximately 384,500 shares valued at $85.4 million, and also slightly increased his holding of Amicus Therapeutics to 6.29 million shares worth $89.1 million.
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Redmile Group’s investment in Array Biopharma Inc (NASDAQ:ARRY) is the biggest among the hedge funds that we track. Green is followed by Samuel Isaly, whose fund Orbimed Advisors, holds roughly 10,0 million shares valued at $72.5 million. James Flynn holds a similar position but chose to cut his exposure by 20% during the second quarter, leaving his fund Deerfield Management with 9.53 million shares worth $68.7 million. A developer of small molecule cancer drugs, Array Biopharma has a market cap of $772 million and does not pay a dividend. For the three months ending June 30, the company posted revenues of $12.3 million, more than double the figure reported for the same period last year, along with a loss per share of $0.09. The current quarter is expected to bring revenues of $14.02 million and a wider loss of $0.18 per share.