Paul Orlin and Alex Porter’s Amici Capital has recently disclosed a new position in Accretive Health Inc. (OTCMKTS:ACHI) in a 13G form filed with the Securities and Exchange Commission. According to the filing, the fund currently owns 5.56 million shares in the revenue cycle management services provider in the healthcare industry, which represent 5.7% of the company’s outstanding stock.
Amici Capital, renamed from Porter Orlin in 2013, is a long/short equity hedge fund currently overseen by Paul Orlin. The New York-based hedge fund was established as Porter Management in 1976 by Alex Porter, who passed away in 2014. Alex Porter’s first fund delivered a net compounded annual return of 20% since its inception until 1993, when Paul Orlin joined the hedge fund as a partner. Eventually, Paul Orlin, who currently serves as the Chief Investment Officer and Portfolio Manager at Amici Capital, took the reins of the firm’s portfolio in 1994 and has not disappointed so far. The hedge fund generated an average return of 14% since Orlin joined the firm until 2013. Amici Capital is currently backed up by a team of 27 employees and has $2.2 billion in assets under management. According to the fund’s most recent 13F filing with the SEC, Amici Capital manages an equity portfolio worth $2.78 billion, while its top ten holdings amass 37.48% of the value.
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In the eyes of most traders, hedge funds are assumed to be underperforming, old investment tools of the past. While there are more than 8,000 funds in operation at present, Hedge fund experts at Insider Monkey look at the aristocrats of this group, around 700 funds. Contrary to popular belief Insider Monkey’s research revealed that hedge funds underperformed in recent years because of their short positions as well as the huge fees that they charge. Hedge funds managed to outperform the market on the long side of their portfolio. In fact, the 15 most popular small-cap stocks among hedge funds returned 123% since the end of August 2012 and beat the S&P 500 Index by some 66 percentage points (see more details here). This is a huge margin which is why hedge funds’ recent Accretive Health purchases is a strong indicator.
Accretive Health Inc. (OTCMKTS:ACHI) is a leading provider of services and technology for the healthcare industry and is one of the largest hospital revenue cycle management companies in the United States. The company has a clearly outlined mission of assisting its healthcare clients in strengthening their financial stability and delivering better care at more affordable costs. In order to accomplish its mission, Accretive has developed an end-to-end revenue cycle solution that is able to perform a number of functions such as patient registration, insurance and benefit verification, clinical documentation and coding, billing and follow up services. The stock of the company is down by 62% year-to-date and has recently plummeted after a takeover offer from Ascension Health, which significantly undervalued the company.
The Board of Directors at Accretive has recently decided to review potential strategic alternatives to enhance shareholder value, which means that the company is exploring the possibility of acquisition by other companies, but does not exclude the possibility of remaining a stand-alone firm. This comes after Accretive received a buyout offer from Ascension Health of roughly 50% below its market value at the closing stock price on July 16. Ascension’s affiliated hospital systems provided approximately 50% of Accretive’s total gross cash from contracting activities in 2014 and the company asserted that it does not plan to renew its contract with Accretive when the existing agreement expires on August 6, 2017. This statement has put even more pressure on Accretive, which might actually be the reason why the management is currently reviewing different strategic alternatives.
Although Accretive is expected to report its financial results for the second quarter of 2015 after the market close on August 5, we will take a quick look at its previously-reported financials. The company posted revenues of $10.97 million for the first quarter, compared to $12.96 million reported for the same quarter a year ago. At the same time, Accretive reported a diluted net loss per share of $0.32, compared to a diluted net loss per share of $0.57 a year earlier.
So far, Amici is the only fund from our database that disclosed holding shares of Accretive, although it is not surprising, taking into account that it is a small-cap, OTC stock. It is not clear whether the fund purchased shares after their slump in order to benefit from the company’s turnaround, or in order to bet on a potential takeover. Nevertheless, this move could mean a bullish sign for the stock and we’ll keep a close eye to see if other large investors follow suit.
Disclosure: None
