These 4 Stocks Were Just Bought by Baker Bros. Advisors, Clint Carlson, More

The hedge fund industry closed in negative territory for 2015, marking the fourth year of decline for the industry since 1990. Nonetheless, approximately 55% of the entire pool of hedge funds posted gains last year, so the natural selection process might lead to a stronger performance for the industry in the upcoming years. Data shows that hedge fund customers withdrew more capital from hedge funds than they invested in the fourth quarter of 2015, which denoted the first quarter of net outflows since 2011. Having this in mind, the following article will discuss four filings submitted with the U.S Securities and Exchange Commission by a few widely-known hedge fund managers tracked by Insider Monkey, including Clint Carlson and Nathaniel August.

Imitating hedge funds and other institutional investors can help identify some of the most profitable stocks on the market. However, our extensive research that covered the period between 1999 and 2012, showed that the best approach is to follow these investors into their small-cap stocks. Our backtests showed that the 15 most popular small-cap stocks among hedge funds managed to generate a monthly alpha of 81 basis points, versus an alpha of 0.7 percentage points posted by their top 50 large-cap picks (see more details here).

Nathaniel August’s Mangrove Partners keeps buying more shares of SunCoke Energy Inc. (NYSE:SXC). The investment firm acquired a 1.79 million-share stake in the independent producer of coke during the third quarter, and has been gradually boosting it since then. According to several Form 4 filings, Mangrove Partners acquired 91,580 shares on Tuesday and 245,563 shares on Wednesday, at prices ranging from $2.11 to $2.21 per share. The investment firm acquired an additional 399,601 shares last week and currently holds 7.36 million shares, which account for 11.51% of the company’s outstanding common stock. SunCoke Energy Inc. (NYSE:SXC) owns and operates five cokemaking facilities in the United States and one cokemaking facility in Brazil. Coke is produced by heating metallurgical coal in a refractory oven; hence, the company’s financial performance has been impacted by depressed commodity prices (including coke).

SunCoke Energy reported total revenue of $1.01 billion for the nine months that ended September 30, down from $1.11 billion reported for the same period of the prior year. The decrease was mainly attributable to the pass-through of lower coal prices, as mentioned above. The company’s full-year 2015 estimated coke production totaled 4.12 million tons, down by 52,000 tons relative to the production reached in 2014. The shares of SunCoke Energy have plummeted by 86% over the last year, which appears to have created an attractive entry point for some investors. The hedge fund sentiment towards the stock did not change much during the third quarter however, as the number of smart money investors with positions in the company remained flat quarter-over-quarter at 35. Michael Blitzer’s Kingstown Capital Management upped its stake in SunCoke Energy Inc. (NYSE:SXC) by 70% during the September quarter to 4.25 million shares.

The next two pages of this article discuss the other three filings submitted with the SEC.

As stated by a separate Form 4 filing, Baker Bros. Advisors, managed by Julian Baker and Felix Baker, snapped up 344,895 shares of BioCryst Pharmaceuticals Inc. (NASDAQ:BCRX) over the past several days, at prices between $6.60 and $7.50 per share. The healthcare-focused fund currently owns approximately 14.57 million shares of the biotechnology company, which focuses on developing novel small molecule drugs that block key enzymes involved in the pathogenesis of diseases. BioCryst Pharmaceuticals Inc. (NASDAQ:BCRX) is currently working on three development programs, which include a placebo-controlled clinical trial of orally-administered avoralstat in patients with HAE, called OPuS-2; the BXC7353 trial (which is structurally different from avoralstat, but employs a similar action mechanism of targeting plasma kallikrein); and the BCX4430 trial. RAPIVAB, one of the company’s products designed to treat acute uncomplicated influenza, was approved by the FDA back in 2014. However, the company sealed an agreement with Seqirus UK Limited in June 2015, which granted SUL rights to develop, manufacture and commercialize RAPIVAB. According to the agreement, the company received an upfront payment of $33.7 million and may also receive up to $12.0 million in additional payments. Allegedly, BioCryst Pharmaceuticals is believed to be a potential acquisition target, so it is worth keeping a close eye on the company. The number of hedge funds from our database with stakes in the company dropped to 14 from 25 during the third quarter, which was likely the result of the pullback from biotech stocks towards the end of the quarter. Peter Kolchinsky’s RA Capital Management owns 1.20 million shares of BioCryst Pharmaceuticals Inc. (NASDAQ:BCRX) as of September 30.

A Schedule 13G filing reveals that Steven Boyd’s Armistice Capital LLC owns 3.13 million shares of BioDelivery Sciences International Inc. (NASDAQ:BDSI), which constitute 5.9% of the company’s shares. This represents a large increase from the 1.48 million-share stake disclosed through the fund’s 13F for the September quarter. The specialty pharmaceutical company has two products that are approved by the FDA, while three other products are in development. The company recognized $1.2 million in product sales for the three-month period that ended September 30, from the launch of its BUNAVAIL. At the end of October 2015, BioDelivery Sciences International Inc. (NASDAQ:BDSI) and its partner Endo International plc – Ordinary Shares (NASDAQ:ENDP) announced that the FDA had approved BELBUCA, which triggered a milestone payment of $50 million from Endo. A total of 22 smart money investors from our system had BioDelivery Sciences in their portfolios at the end of September, accumulating 24.10% of its common stock. Kevin Kotler’s Broadfin Capital reported owning 4.74 million shares of BioDelivery Sciences International Inc. (NASDAQ:BDSI) through its 13F for the third quarter.

In a freshly-amended 13D filing, Carlson Capital reported owning 2.89 million shares of Forestar Group Inc. (NYSE:FOR), which make up 8.61% of the company’s outstanding shares. Clint Carlson’s investment firm owned 1.05 million shares of the company on September 30, as revealed by the fund’s 13F for the third quarter. The recent 13D also reveals that Carlson Capital initially invested in Forestar’s stock for investment purposes, with the belief that the stock represented an attractive investment opportunity at the time of purchase, “and not with the purpose nor with the effect of changing or influencing the control or management of the Issuer”. Nonetheless, the investment firm intends to engage in discussions with the company’s management, its Board and other shareholders, regarding “possible changes to the compositions of the Board of Directors”, and may also propose candidates for election to the company’s Board at its 2016 annual meeting of stockholders, so it appears Carlson Capital has had a change of heart regarding its investment.

Forestar Group operates as a real estate, and oil and gas company through three business segments: real estate, oil and gas, and other natural resources. The performance of all three business segments was weaker in 2015 compared to the prior year. Forestar Group Inc. (NYSE:FOR)’s revenue generated from the real estate segment reached $100.20 million for the nine months that ended September 30, down from $153.10 million reported a year earlier. Expectedly, the revenue generated from the other two segments was substantially lower in 2015, despite an increase in production volumes, mainly owing to lower oil and gas prices. A mere eight hedge funds tracked by Insider Monkey had stakes in the company at the end of the third quarter, amassing 15.30% of its shares. Jeffrey Bronchick’s Cove Street Capital holds 2.60 million shares of Forestar Group Inc. (NYSE:FOR) as of the end of the third quarter.

Disclosure: None