Three prominent healthcare-focused funds that we track at Insider Monkey submitted filings with the SEC today, disclosing new or bulked up positions in three different healthcare stocks. Given their focus and expertise on the healthcare sector, the stocks at the heart of these funds’ moves should be given consideration as potential investments. In this article we’ll find out what those stocks are and who is investing in them.
Firstly, let’s check in on James Flynn’s (pictured) healthcare fund Deerfield Management, which filed today on biopharmaceutical company XenoPort Inc. (NASDAQ:XNPT). Deerfield’s filing revealed a 6.29 million-share position in Xenoport, representing 9.97% of its common shares. Deerfield is not the only fund we track that has made a move on XenoPort recently, as just last week, Steven Boyd’s Armistice Capital reported upping its holding to 2.6 million shares. Unlike Armistice however, which held 1.6 million shares on June 30, Deerfield’s position in the stock is a new one for the firm.
Both investors believe they have caught XenoPort Inc. (NASDAQ:XNPT) at the right price given its sharp decline in the middle of September. Its precipitous drop of over 37% during a span of four trading sessions beginning on September 14 followed the revelation that its psoriasis treatment XP23829 was causing frequent gastrointestinal-related side effects in testing, which led to nearly one-third of the trial subjects prematurely dropping out of the study. On the other hand however, the study did meet its primary endpoint, exhibiting efficacy for reducing lesions in psoriatic patients.
Hedge funds in our database held 27.80% of XenoPort Inc. (NASDAQ:XNPT)’s shares on June 30, before the latest purchases, which would push the total to nearly 40% barring other as-yet-unreported moves. Thus, elite investors are quite bullish on the stock and the product candidates of the company. In addition to Boyd’s position, Julian Baker and Felix Baker’s Baker Bros. Advisors was another noteworthy shareholder of XenoPort’s as of June 30, owning 6.51 million shares.
A reader might question our decision to focus on the small-cap category, considering that it’s mostly the larger counterparts of these companies that head the portfolios of most hedge funds. The reason for our focus is simple. Our research has shown that in the period between 1999 and 2012 the top small-cap picks of hedge funds outperformed the broader market by nearly one percentage point per month, whereas the top overall picks (mostly large-caps) underperformed by seven basis points per month during the same period. Why pay high fees to own a glut of low-performing stocks when you can invest on your own in hedge funds’ best stock picks? Since its launch in August 2012, Insider Monkey’s small-cap strategy has outperformed the S&P 500 every year, returning 102% since then, nearly two-times greater returns than the S&P 500 (read the details here).
Check out the following page to get the lowdown on the other two healthcare filings of note, including one concerning a newly-public company.