You probably haven’t heard of Alex Denner‘s Sarissa Capital Management, which is a shame, as the fund is coming off a first-quarter in which its stock picks in companies valued at $1 billion or more delivered weighted average returns of 53.2%, pushing its 1-year returns to an even 200%.
With the media paying most of its attention to the hedge funds run by billionaires (many of which are now delivering tepid returns), the next wave of promising hedge fund managers like Alex Denner are being ignored in favor of the same stale stories rehashing Buffett’s investment in Apple Inc. (NASDAQ:AAPL), Ackman’s investments in Valeant Pharmaceuticals Intl Inc (NYSE:VRX) and Herbalife Ltd. (NYSE:HLF), and Einhorn’s activist battle with General Motors Company (NYSE:GM).
We get it, those investors earned their reputations and built loyal followings through decades of outperformance (even if the argument could be made that it was easier to beat the market back then). However, the legends of the past should eventually give way to the legends of tomorrow, which doesn’t seem to be happening in the hedge fund news world. It’s somewhat akin to a fantasy baseball site that focuses only on washed-up players like Ichiro because they have name recognition rather than the young stars that are actually better players now (before anyone cries foul, I’m not necessarily calling Buffett, Ackman or Einhorn washed-up). The readers of that site are probably not going to make for very good fantasy baseball players.
The same can be said of investing in hedge funds or mimicking hedge funds’ moves. Of the top-25 best performing funds in our system in the third-quarter of last year, seven of those funds were again in the top-25 in the first-quarter of this year, including Sarissa Capital, despite the fact that statistically, only one of them should’ve shown up again (considering we rank over 650 hedge funds on the performance of their stock picks). The sooner one can identify winning hedge funds, the sooner their picks can be exploited.
This is what we do at Insider Monkey. We track over 700 different hedge funds and institutional investors and share the top picks of the best performing funds in our quarterly newsletters. Our flagship strategy has returned 44.2% since February 2016, beating the S&P 500 by nearly 15 percentage points. Our latest stock picks made in February outperformed the market by 5 percentage points in the last three months and our newest picks are being released today. We are also offering a 14-day money-back guarantee on our premium newsletters, plus you can get $90 off by using this link, so don’t miss this chance to check out our latest picks risk-free and see if Insider Monkey’s simple and effective small-cap strategy would make a good addition to your portfolio.
Now then, let’s check out three stocks which Mr. Denner’s fund held throughout the 1-year period ended March 31 of this year, contributing to his immense success during that time. It should be noted that one of the fund’s biggest contributors, with gains of nearly 300%, was Ariad Pharmaceuticals, which was acquired by Japanese firm Takeda in February (and therefore won’t be covered in this article).
The Medicines Company (NASDAQ:MDCO)
Sarissa Capital continued to own 1.75 million shares of The Medicines Company (NASDAQ:MDCO) on March 31, unchanged over the quarter and year. The only difference in the position? It was valued at $55.66 million on March 31, 2016, which had jumped to $85.67 million a year later, making the fund a tidy $30 million. It also now ranks as the fund’s top stock pick.
The Medicines Company (NASDAQ:MDCO) has been exploring its strategic options for several months, which could include a sale or the spin-off of its infectious diseases unit. Cowen analyst Chris Shubutani recently hiked his price target on the stock to $61 from $39, citing favorable views from cardiologists that the company’s Inclisiran could grab meaningful market share away from competing drugs assuming similar efficacy and safety, due to the treatment’s more convenient dosing regimen.
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We’ll check out two other stock picks of Sarissa Capital on the next page.