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Three Healthcare Stocks Hedge Funds Are Snapping Up

Is it a good time to buy Alimera Sciences Inc (NASDAQ:ALIM)James E. Flynn thinks so, having recently acquired 321,784 shares of the pharmaceutical company at prices ranging from $2.10-to-$2.50. Following this move, his fund, Deerfield Management, holds roughly 10.7% of Alimera’s outstanding stock, with the position consisting of 4.76 million shares of common stock and 8.41 million underlying shares of convertible preferred stock. Meanwhile Laboratory Corp. of America Holdings (NYSE:LH) has caught the attention of Andreas Halvorsen. According to a recent filing with the Securities and Exchange Commission, he has initiated a position that currently amasses 5.39 million shares and gives Viking Global control over 5.3% of the company’s outstanding stock. In a third move, John A. Levin has decided to step up his interest in Affymetrix, Inc. (NASDAQ:AFFX). His fund, Levin Capital Strategies, now holds more than 4.22 million shares or 5.3% of the company’s common stock, up from 1.57 million shares reported at the end of the second quarter. We’ll dig into all three of these moves in this article and look for the potential reasoning behind them.

Gilead GILD pharmacist store examing pharmaceutical stocks medical

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We don’t just track the latest moves of hedge funds. We are, in fact, more interested in their 13F filings, which we use to determine the top 15 small-cap stocks held by the funds we track. We gather and share this information based on 16 years of research which showed that these 15 most popular small-cap picks have a great potential to outperform the market, beating the S&P 500 Total Return Index by nearly one percentage point per month in backtests, and easily beating the most popular large-cap picks of funds, which nonetheless get the majority of their collective capital. Why pay fees to invest in both the best and worst ideas of a particular hedge fund when you can simply mimic only the very best ideas of the best fund managers on your own? Since the beginning of forward testing in August 2012, the Insider Monkey small-cap strategy has outperformed the market every year, returning 102%, nearly two-times greater returns than the S&P 500 during the same period (see more details).

James E. Flynn is a great bio-tech and pharma enthusiast, having invested as much as 93% of his capital in stocks from the healthcare sector. He founded Deerfield Management in 2000 with the goal of funding R&D, managing hostile takeovers, and offering financial advisory services. Since then he has grown his portfolio to a respectable $3.5 billion in assets under management. As of the end of the second quarter, Deerfield’s number one bet is Horizon Pharma PLC (NASDAQ:HZNP), with the fund having reported ownership of 12.2 million shares, down by 5% over the quarter. Flynn is also bullish on Dyax Corp. (NASDAQ:DYAX), having doubled his investment during the quarter to 2.48 million shares, while also boosting his stake in NxStage Medical, Inc. (NASDAQ:NXTM) by 14% to 5.77 million shares.

James E. Flynn
James E. Flynn
Deerfield Management

A small pharmaceutical company with a market cap of $115 million, Alimera Sciences Inc (NASDAQ:ALIM) researches and develops ophthalmic pharmaceuticals. The stock has been in a down trend since the beginning of 2014 and has shed 53% of its value so far this year. While earnings have been improving, with Alimera reporting $5.78 million in revenues for the 2015 second quarter, up by 163% year-over-year, profits have vanished, as the company announced a loss of $0.19 per share at the end of June. It is no wonder then that hedge funds have been avoiding the stock. 11 elite funds within our database reported long positions in Alimera Sciences Inc (NASDAQ:ALIM) as of the end of the second quarter, down from 13 as of the end of March. Their combined holdings were valued at $72.7 million, down by 6.8%, and accounted for 35.5% of the company’s common stock. Samuel Isaly is keeping tabs on Alimera, with his fund Orbimed Advisors holding exactly 1.5 million shares.

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Head to the next page to find out more about the reasoning behind Halvorsen and Levin’s latest moves.

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