With the Fed having postponed the rate hike again, companies are taking full advantage of the low interest rates to finance their diversification and expansion plans. Three major deals involving biotech and technology companies, as well as two conglomerates, have hit the headlines today. Let’s take a look at these deals and analyze the details behind them as well as how investors reacted to the news.
Let’s first take a step back and analyze how tracking hedge funds can help an everyday investor. Through our research we discovered that a portfolio of the 15 most popular small-cap picks of hedge funds beat the S&P 500 Total Return Index by nearly a percentage point per month on average between 1999 and 2012. On the other hand the most popular large-cap picks of hedge funds underperformed the same index by seven basis points per month during the same period. This is likely a surprise to many investors, who think of small-caps as risky, unpredictable stocks and put more faith (and money) in large-cap stocks. In forward tests since August 2012 these top small-cap stocks beat the market by an impressive 53 percentage points, returning 102% (read the details here). Follow the smart money into only their best investment ideas all while avoiding their high fees.
Shire PLC (ADR) (NASDAQ:SHPG) quickly turned its attention towards other takeover targets after its $30 billion offer for Baxalta Inc (NYSE:BXLT) was rejected and has reached an agreement to buy Dyax Corp. (NASDAQ:DYAX) for a minimum $5.9 billion. Shareholders of the U.S biotech company will receive $37.30 per share in cash, with the possibility of a further one-time payment of $4 per share should Dyax’s flagship drug be approved by regulators. The drug in question is DX-2930 for the treatment of hereditary angiodema, a disease that attacks the immune system. A phase 3 study of the drug is expected to start before the end of this year. Should the drug be approved, Shire estimates annual sales of approximately $2 billion. The British drug company has prepared a $5.6 billion loan to finance the deal and is confident it will have only a mild impact on its bottom line. Dyax Corp. (NASDAQ:DYAX) surged by as much as 33% in the first hour of trading today, while Shire PLC (ADR) (NASDAQ:SHPG) is marginally down, by 0.46%.
The popularity of Shire PLC (ADR) (NASDAQ:SHPG) among elite hedge funds cooled down a bit during the second quarter, as the number of funds invested in the company fell to 44 at the end of the second quarter, while their combined holdings represented 7.3% of the company’s common stock. Billionaire John Paulson held the largest stake in the company among the hedge funds we follow, with Paulson & Co having reported ownership of 7.09 million shares as of the end of June. The number of funds holding Dyax Corp. (NASDAQ:DYAX) increased to 33 during the second quarter, and they amassed 18.5% of the company’s outstanding stock. Julian Baker and Felix Baker are set to profit handsomely from this deal, as their fund, Baker Bros. Advisors, held 7.92 million shares of Dyax at the end of the second quarter.
We have more news of big deals and trending stocks on page two.