You’ve probably read a million stories about how Bill Ackman‘s been getting creamed lately, how hedge funds continue to underperform indexes, and how redemptions continue to rock major hedge funds. But have you read one story about Leonard A. Potter‘s Wildcat Capital Management, whose stock picks gained 52% in the first-quarter according to our calculations (based on the weighted average returns of its eight positions in stocks with a market cap of at least $1 billion)? No, no you haven’t.
The mainstream media is predictable if nothing else, and who can blame them? Misery and negativity generate clicks because, let’s face it, many of us feel better about ourselves when we read about the failings of others, and that goes double or triple for the failings of billionaire money managers and their wealthy investors.
Of course, just because the media excessively dwells on hedge funds underperforming the market doesn’t mean they’re not right, and by no means do we advocate that investors pay exorbitant fees to invest with them, nor should they blindly mimic their picks. However, where they can find success is in betting on only the top ideas of the top performing hedge funds, like Wildcat Capital, which can be identified in advance. One need only look to Sessa Capital, another fund you’ve never heard of which was the top-performing fund in our database in the third-quarter and which has since put together two more big quarters for 1-year stock pick returns of 205%.
That’s what we do at Insider Monkey and our flagship strategy has returned 44.2% since February 2016 vs. a 29.6% gain for the S&P 500 index ETF (SPY). Our most recent stock picks, which were disclosed to our subscribers in the middle of February, beat the market by 5 percentage points in the three months since, and we are going to disclose our new stock picks tomorrow. Our system is easy for investors to implement, with just a small batch of trades to be executed once per quarter. We are also offering a 14-day money-back guarantee as well as a large discount on our premium newsletters, so you can check out our latest picks risk-free and see if Insider Monkey’s small-cap strategy is right for your portfolio.
Now then, let’s check out the Q1 performance of a handful of Wildcat Capital’s stock picks to see how the fund pulled off its impressive quarter and whether it’s been sustained in the second-quarter.
Kite Pharma Inc (NASDAQ:KITE)
Wildcat Capital is heavily invested in Kite Pharma Inc (NASDAQ:KITE), which accounts for the bulk of its Q1 success. Kite Pharma’s shares gained 75.04% in the quarter, pushing the value of Wildcat Capital’s position in it to over $185 million. However, in a show of confidence in the stock, the hedge fund did not sell off a single share of it during the period, as it continued to hold 2.36 million shares, even as its 13F portfolio’s exposure to the stock climbed above 58%, an increase of 10 percentage points quarter-over-quarter.
Kite Pharma Inc (NASDAQ:KITE) shares gradually trended up further in the second quarter until the May 8 revelation that a patient enrolled in the company’s trial of its CAR-T therapy KTE-C19 had died. Despite the fact that the deceased patient was suffering from an aggressive disease and was in poor health before being administered the treatment, the markets reacted harshly to the news, sending shares down by 13% on May 8, and they’ve recovered only slightly since. That creates a potential buying opportunity on weakness, as analysts almost unanimously expressed that the death is unlikely to affect the treatment’s approval. Kite Pharma CEO Arie Beldegrun bought 17,000 shares later that day, and several other insiders followed suit to take advantage of the weakness and show their confidence in the stock and treatment.
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We’ll look at two more stock picks of Wildcat Capital on the second page of this article.