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While several hedge funds have suffered enormous losses this year due to their investments in biotech stocks, the performance of the leading biotech-focused hedge fund Baker Bros. Advisors in 2016 has been disappointing in particular. Founded by brothers Julian Baker and Felix Baker in 2000, Baker Bros. Advisors was the best performing fund during the second quarter of 2015 among the 800 funds we track. However, this year the fund find itself in the company of the worst performing funds on the Street. Analysis done by Insider Monkey of Baker Bros. Advisors’ 13F holdings in companies worth at least $1 billion show that the 36 long positions held by the fund delivered a weighted average loss of 25.4% during the first quarter. Considering the dismal performance of the fund, in this post, we are going to focus on its five largest equity holding while entering 2016 and analyze their individual performances so far this year.
We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).
Julian Baker And Felix Baker
Baker Bros. Advisors
#5 ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD)
– Shares Owned by Baker Bros. Advisors (as of December 31): 20.48 million
– Value of Holding (as of December 31): $730.16 million
Baker Bros. Advisors didn’t make any changes in its stake in ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) during the fourth quarter and remained the largest shareholder of the company among funds covered by us at the end of 2015. However, billionaire Ken Griffin’s Citadel Investment Group, which trailed Baker Bros. Advisors as the largest shareholder of ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), reduced its stake in the company by 9% to 1.12 million shares during the same period. Shares of ACADIA Pharmaceuticals Inc. were trading down more than 40% year-to-date till quite recently, but a series of positive news at the end of March helped them in ending the first quarter down by 22%. On March 29, an FDA advisory panel voted in the favor of the company’s drug ‘Nuplazid’ for the treatment of Parkinson’s disease psychosis (PDP) and recently the FDA approved the drug. According to some analysts, Nuplazid can capture as much as 70% market share of PDP drugs and can have peak sales of $7.5 billion by the end of 2018.
#4 AbbVie Inc (NYSE:ABBV)
– Shares Owned by Baker Bros. Advisors (as of December 31): 14.37 million
– Value of Holding (as of December 31): $851.48 million
AbbVie Inc (NYSE:ABBV) is among the few biopharmaceutical companies whose stock hasn’t seen a significant correction this year. Though it ended the first quarter with a marginal loss of 2.5%, it has recouped that loss this month and currently trades 5% in the green for 2016. With an annual dividend yield of 3.81%, AbbVie Inc (NYSE:ABBV) is also one of the best dividend stocks in the biotech space. Despite all these positives AbbVie Inc’s stock currently trades at a low forward P/E of 10.18, which analysts feel is mainly because more than 60% of the sales of the company come from a single drug, ‘Humira’. However, AbbVie has been trying to change that by investing heavily in R&D for the past few quarters. On April 11, the FDA approved AbbVie Inc’s new drug ‘Venclexta’ for the treatment of patients with chronic lymphocytic leukemia (CLL) who suffer from 17p deletion and have been treated with at least one prior line of therapy. Alex Denner‘s Sarissa Capital Management also didn’t make any changes in its stake in AbbVie Inc during the fourth quarter, it continued to own 1.58 million shares of the company at the end of December.
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