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.

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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.

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.

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

A former understudy of the legendary Julian Robertson, Andreas Halvorsen decided to sail on his own in 1999, founding Viking Global with two other former Tiger Management-colleagues. His stock picking talent has made him the manager of one of the largest hedge funds around, with Viking Global’s public equity portfolio being valued at more than $26.4 billion at the end of June. Halvorsen is betting big on Walgreens Boots Alliance Inc (NASDAQ:WBA), having stockpiled more than 24.6 million shares, up by 69% during the second quarter, and is also very optimistic about the prospects of Google, now known as Alphabet Inc (NASDAQ:GOOGL). Viking Global reported ownership of 2.73 million Class A shares, up by 67% over the second quarter.

While hedge funds we track control 19.8% of Laboratory Corp. of America Holdings (NYSE:LH)’ common stock, the company lost some of its appeal to them during the second quarter. The number of funds invested dropped to 52, from 59 at the end of March, while the value of their holdings decreased by 2.54% to $2.4 billion by the end of June. Larry Robbins did not follow the trend and initiated a stake in the company during the quarter, acquiring more than 3.98 million shares, which makes his fund the largest shareholder in our database. John W. Rogers is also bullish, having boosted his stake by 7% to 1.5 million shares, according to Ariel Investments’ latest quarterly report. The stock is trading at a trailing P/E ratio of 24.xx, which is nearly half the industry average of 39.30.

John Levin started Levin Capital Strategies a decade ago, seeking to use his skills in fundamental analysis to invest in large-cap stocks. His equity portfolio has grown steadily and was valued at roughly $6.76 billion at the end of the second quarter. His top ten stock picks include two financial giants: Discover Financial Services (NYSE:DFS) and Citigroup Inc (NYSE:C), the latter of which is also his biggest bet. In its latest 13F filing, Levin Capital reported ownership of 5.6 million Citigroup shares, down by 3% during the quarter, and 2.82 million shares of Discover Financial, double the amount reported at the end of March.

Hedge funds have mixed feelings towards Affymetrix, Inc. (NASDAQ:AFFX), as the number of funds in our database with long positions increased during the second quarter to 22, from 18 at the end of March, while the value of their holding was reduced by 1.1% to $156 million. Still, they control a significant 18.5% of the company’s common stock. Samuel Isaly is bullish on Affymetrix, having boosted his stake by 3% during the second quarter, taking it to 7.51 million shares. Although Affymetrix, Inc. (NASDAQ:AFFX) staged a rally at the start of 2015, it was short-lived and shares have plummeted by 14% to yesterday’s closing price of $8.34 per share. The stock carries a trailing P/E ratio of 34, which is in line with the industry average of 31.90. Second quarter revenues came in at $88.97 million, up by 4% year-over-year, while earnings were at $0.08 per share. For the current quarter Wall Street expects revenues to fall to $87.7 million, while earnings are expected to stay the same.

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