Founded in 1987, Apex Capital Management invests mainly in companies that have market caps of up to $10 billion and is currently overseeing $6.5 billion in assets under management. The fund uses a combination of macroeconomic and fundamental analysis to pick its stocks. The firm’s management does, however, have a preference for technology, healthcare, and consumer discretionary stocks, which account for 72% of its public equity portfolio as of September 30. Foot Locker, Inc. (NYSE:FL) has become Apex Capital Management’s new favorite stock overall, followed by Total System Services, Inc. (NYSE:TSS). In this article, however, we will focus on the biotech stocks in Apex Capital Management’s portfolio, as the healthcare sector is still a hot one and more intriguing than ever.
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 their activity. 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 53 percentage points over the 37 month period beginning from September 2012, returning 102% (read the details here).
Apex’s holding of WuXi PharmaTech (Cayman) Inc. (ADR) (NYSE:WX) was boosted by 4% during the third quarter, with the fund reporting ownership of 1.72 million shares, a position valued at $74.4 million at the end of September. A provider of laboratory services and a manufacturer of pharmaceutical ingredients, WuXi PharmaTech has also attracted the attention of Mario Gabelli, who increased his stake during the third quarter to some 262,567 shares worth approximately $11.3 million. WuXi PharmaTech (Cayman) Inc. (ADR) (NYSE:WX) has provided shareholders with great returns so far this year, advancing by 31% through yesterday’s closing price of $44.74 per share. Trading at a price-to-earnings (P/E) ratio of 32.xx, the stock is undervalued compared to most of its peers, with the industry average P/E standing at 39.30.
Increasing the investment in Irish contract research organization ICON PLC (NASDAQ:ICLR) seems to have been another great decision by the management of Apex, with the company’s latest financial results beating Wall Street’s expectations. Revenues came in at $394.7 million, while earnings were $1.02 per share, surpassing analysts’ expectations of $1.01 per share. The report was released this morning before the market opened and has prompted shares to rally, with them currently up by 4%. Perhaps this will trigger a comeback, as the stock has been falling since mid-August, although it is still 26.2% higher year-to-date. Apex Capital Management upped its stake in ICON PLC (NASDAQ:ICLR) by 10% to amass just under 1 million shares, a position worth $70.9 million as of September 30.
Three more of Apex’s top biotech stock picks are studied on the forthcoming page.