What Hedge Funds Think Of Goldman Sachs’ Top Healthcare Takeover Targets

A surge of M&A activity involving healthcare, financial, and retail companies boosted the value of deals in July to over $430 billion, resulting in the seventh-busiest month on record in terms of value. Healthcare and energy M&A activity has been the most prominent this year, while the healthcare industry in particular has seen the busiest year on record. Healthcare deals represent approximately 16% of the total global M&A deals this year, which amounts to $2.99 billion. However, Goldman Sachs believes that more deals will come in the months ahead, so risk takers might find great buying opportunities among potential M&A players. Goldman Sachs identified a few healthcare companies that are expected to be the next takeover targets in the industry. In the following article, we will be discussing the following potential targets suggested by the investment bank, which are Pacira Pharmaceuticals Inc. (NASDAQ:PCRX), Anacor Pharmaceuticals Inc. (NASDAQ:ANAC), and Brookdale Senior Living Inc. (NYSE:BKD).

cheerful pharmacist chemist woman standing in pharmacy drugstore

Why do we pay attention to hedge fund sentiment? Most investors ignore hedge funds’ moves because as a group their average net returns trailed the market since 2008 by a large margin. Unfortunately, most investors don’t realize that hedge funds are hedged and they also charge an arm and a leg, so they are likely to underperform the market in a bull market. We ignore their short positions and by imitating hedge funds’ stock picks independently, we don’t have to pay them a dime. Our research have shown that hedge funds’ long stock picks generate strong risk adjusted returns. For instance the 15 most popular small-cap stocks outperformed the S&P 500 Index by an average of 95 basis points per month in our back-tests spanning the 1999-2012 period. We have been tracking the performance of these stocks in real-time since the end of August 2012. After all, things change and we need to verify that back-test results aren’t just a statistical fluke. We weren’t proven wrong. These 15 stocks managed to return 118% over the last 36 months and outperformed the S&P 500 Index by more than 60 percentage points (see the details here).

Let’s start by looking into Pacira Pharmaceuticals Inc. (NASDAQ:PCRX), a specialty pharmaceutical company that develops and commercializes proprietary pharmaceutical products for use in U.S. hospitals and ambulatory surgery centers. There are 25 hedge funds tracked by Insider Monkey that own stakes in the company as of June 30, two less than did on March 31. Despite this slight decrease, the value of these stakes rose to $367.67 million from $254.29 million during the second quarter. Goldman Sachs suggests that the company’s key product Exparel, approved for administration into the site of surgery to produce post-surgery pain relief, is an “underappreciated asset” and could eventually turn into a near-term catalyst for the stock. The investment bank expects better-than-expected monthly sales data for this product. John Lykouretzos’ Hoplite Capital Management initiated a new position in Pacira Pharmaceuticals Inc. (NASDAQ:PCRX) comprised of 1.26 million shares.