A Look at Visium Asset Management’s Top Picks Amid Loud Insider Trading Case

Jacob Gottlieb’s multi-billion-dollar hedge fund Visium Asset Management LP has been making headlines earlier today, as federal authorities filed criminal and civil securities charges against several current and former traders at the hedge fund. The case involving Mr. Gottlieb’s firm focuses on the relationship between Sanjay Valvani, one of the fund’s main portfolio managers, and a former U.S. FDA official, Gordon Johnston. According to prosecutors from the Manhattan U.S. attorney’s office, Mr. Valvani generated ill-gotten trading gains totaling $25 million by gaining inside information from Mr. Johnston about FDA’s pending approvals of generic drug applications. Mr. Valvani was also accused of passing on the inside information to Christopher Plaford, a former colleague, who also netted illegal gains using that information. “I am deeply saddened by today’s events,” Mr. Gottlieb was quoted as saying in a statement. Given all the fuss around New York-based Visium Asset Management, Insider Monkey decided to have a look at the fund’s top equity holdings as of the end of the first quarter of 2016.

Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).

#5. Centene Corp (NYSE:CNC)

– Shares owned by Visium Asset Management as of March 31: 1.68 Million

– Value of Visium Asset Management’s holding as of March 31: $103.67 Million

Visium Asset Management LP acquired a new stake of 1.68 million shares of Centene Corp (NYSE:CNC) during the first three months of 2016, which was worth $103.67 million at the end of the March quarter. The new stake accounted for roughly 1.8% of the fund’s entire portfolio at the end of the quarter. The Patient Protection and Affordable Care Act, usually referred to as Obamacare, has turned out to be unprofitable for most health insurers, but Centene is among the few insurers that are making money on Obamacare plans. In late March, the health insurer completed the $6.0 billion-acquisition of managed care organization Health Net. The freshly-swallowed target offers health care services through health plans and government-sponsored managed care plans and will enable Centene to boost its market share while other insurers are scaling back their selling plans on exchanges. Centene shares are up a little less than 2% year-to-date. Israel Englander’s Millennium Management owns 1.31 million shares of Centene Corp (NYSE:CNC) as of the end of March.

Head to the next pages of this article, where we will reveal the other largest equity positions in Visium Asset Management’s portfolio as of the end of March.

#4. Pacira Pharmaceuticals Inc. (NASDAQ:PCRX)

– Shares owned by Visium Asset Management as of March 31: 2.24 Million

– Value of Visium Asset Management’s holding as of March 31: $118.63 Million

The New York-based hedge fund trimmed its exposure to Pacira Pharmaceuticals Inc. (NASDAQ:PCRX) by 51,912 shares during the first quarter of 2016, ending the period with 2.24 million shares valued at $118.63 million. The reduced stake made up roughly 2.0% of the fund’s portfolio at the end of March. The specialty pharmaceutical company focused on developing medicines for use in hospitals and ambulatory surgery centers has seen its market value plummet by 47% since the beginning of the year. It appears that investors are increasingly worried about the slowing growth rate of Exparel sales. Exparel, an injectable treatment administered to relieve pain after surgery, derived roughly 97% of Pacira’s first-quarter top line. First-quarter Exparel sales grew 14% year-over-year to $63.75 million. The company’s operating expenses also jumped alarmingly in the first quarter of the year. Lee Ainslie’s Maverick Capital added a 1.61 million-share position in Pacira Pharmaceuticals Inc. (NASDAQ:PCRX) to its portfolio during the first quarter of 2016.

#3. Endo International plc (NASDAQ:ENDP)

– Shares owned by Visium Asset Management as of March 31: 6.68 Million

– Value of Visium Asset Management’s holding as of March 31: $188.06 Million

Jacob Gottlieb’s multi-billion-dollar hedge fund boosted its stake in Endo International plc (NASDAQ:ENDP) by 1.51 million shares during the January-to-March period to 6.68 million shares. The increased stake was worth $188.06 million on March 31 and accounted for 3.2% of the investment firm’s portfolio. The specialty pharmaceutical company producing specialty branded pharmaceuticals and generic products is among the biggest losers of 2016, as the company has lost 72% of its market value since the start of 2016. The recent downward revision of its full-year earnings outlook, which mainly reflected competitive pressure in base generics business and loss of exclusivity for Voltaren gel, put significant weight on Endo’s stock. Just recently, analysts at Mizuho Securities upgraded Endo International to ‘Neutral’ from ‘Underperform’ and raised the price target on the stock to $16 from $13, citing likely shareholder pressure to create value through restructuring options. John Paulson’s Paulson & Co. owns 9.52 million shares of Endo International plc (NASDAQ:ENDP) as of March 31.

#2. Allergan plc (NYSE:AGN)

– Shares owned by Visium Asset Management as of March 31: 989,910

– Value of Visium Asset Management’s holding as of March 31: $268.57 Million

The multi-billion-dollar hedge fund cut its position in Allergan plc (NYSE:AGN) by 105,775 shares during the first three months of 2016 to 989,910 shares. The reduced stake was valued at $268.57 million at the end of the first quarter and made up 4.6% of the hedge fund’s entire portfolio. On the last day of May, feared activist investor Carl Icahn of Icahn Capital LP announced in a statement on his website that his fund acquired a “large position” in the maker of wrinkle-injection Botox, saying that he and his team “are very supportive of CEO Brent Saunders”. While the actual size of the stake is not known to the general public just yet, Mr. Icahn’s investment comes two months after the termination of the planned $160 billion inversion deal between Allergan and Pfizer Inc. (NYSE:PFE) due to new tax inversion rules imposed by the U.S. government. Allergan shares are 23% in the red year-to-date. Dan Loeb’s Third Point LLC was the owner of exactly 5.00 million shares of Allergan plc (NYSE:AGN) at the end of March.

#1. Laboratory Corp. of America Holdings (NYSE:LH)

– Shares owned by Visium Asset Management as of March 31: 2.39 Million

– Value of Visium Asset Management’s holding as of March 31: $280.35 Million

Laboratory Corp. of America Holdings (NYSE:LH) was the largest equity holding in Visium Asset Management’s portfolio at the end of March, accounting for 4.8% of the portfolio value. The New York-based asset manager reduced its stake in the company by 370,011 shares during the first quarter to 2.39 million shares, which were worth $280.35 million on March 31. The shares of the world’s leading healthcare diagnostics company are up 1% so far in 2016, thanks to a gain of 9% in the past three months. Earlier this month, analysts at Credit Suisse raised their price target on LabCorp to $143 from $135 while maintaining the ‘Outperform’ rating on the stock, citing higher-than-anticipated synergies from the acquisition of Covance Inc. completed in early 2015. Covance operates as the company’s drug development business. Some investors have been previously worried that the healthcare diagnostics company may be vulnerable to declining fees for laboratory services reimbursed by Medicare, but those worries seem to have faded away. Larry Robbins’ Glenview Capital owned 5.46 million shares of Laboratory Corp. of America Holdings (NYSE:LH) on March 31.

Disclosure: None