In a new filing with the Securities and Exchange Commission, Billionaire Chase Coleman‘s Tiger Global disclosed slightly reducing its exposure to Bitauto Hldg Ltd (ADR) (NYSE:BITA) to almost 6.09 million shares, from 6.57 million shares held earlier. In another filing, Peter Kolchinsky‘s RA Capital Management reported raising its stake in Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) to 3.09 million shares from some 2.47 million disclosed previously. Following both moves, Tiger Global’s activist stake amasses 9.6% of Bitauto’s outstanding stock, while RA Capital’s position represents 9.7% of Aurinia Pharmaceutical’s shares.
Following the activity of great hedge fund managers like Mr. Coleman and Mr. Kolchinsky can provide many insights for smaller investors seeking to obtain market-beating returns. For one reason, RA Capital has an outstanding track record of picking companies with promising drugs and technologies. Mr. Coleman is considered one of the best so-called “Tiger Cubs” (the names used for former employees of Julian Robertson’s Tiger Management) and from both public and equity investments managed to score impressive returns that amounted to 45%, 23%, 14%, and 17% in the last four years alone. Another point is that both investors have great stock-picking skills in the small-cap space, which fall in line with our area of expertise.
At Insider Monkey we are following the activity of over 700 hedge funds and analyze meticulously their equity portfolios, which is the only possible way to get official data on the stocks in which these hedge funds prefer to invest. The founder of Insider Monkey, Dr. Ian Dogan determined through backtests that an equally-weighted equity portfolio that consisted of the 50 most popular stocks among hedge funds underperformed the market by an average of 7 basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stock picks outperformed the market by around 1.0 percentage points per month during the same period. We have also been sharing the list of the top 15 small-cap stocks among hedge funds in real-time since the end of August 2012. These stocks have managed to return 132% since then and beat the S&P 500 ETF by some 79 percentage points (read the details here).
Tiger Global trimmed its stake in Bitauto Hldg Ltd (ADR) (NYSE:BITA) soon after the company released its latest financial results, which even though they came in higher in both year-on-year terms and above analysts’ estimates, sent the stock lower by 14%. The second hit the stock took came after Oppenheimer cut its price target to $62 from $95, although it maintained an ‘Outperform’ rating, and Brean Capital downgraded the stock to ‘Hold’ from ‘Buy’ after the earnings report. One of the reasons for the stock’s downgrade and declines is Bitauto’s plans to increase spending in the following quarters, which will reduce the company’s earnings and therefore damage profit margins.
Nevertheless, taking into account that over the last three years, Bitauto Hldg Ltd (ADR) (NYSE:BITA)’s stock has performed very well, surging by more than eightfold, the stock of the Internet content and advertising company, which operates in the automobile segment, is worth keeping for the long-run. The same idea is shared by 16 other funds aside from Tiger Global, although their stakes are much much smaller. For example, the second-largest position in Bitauto Hldg Ltd (ADR) (NYSE:BITA) among the funds that we track, is held by another Tiger Cub, Jesse Ro’s Tiger Legatus Capital, which initiated a stake that contains 148,400 shares during the fourth quarter.
Let’s move on to Aurinia Pharmaceuticals Inc (NASDAQ:AUPH), in which RA Capital has increased its stake. Aurinia is a micro-cap biotechnology company, whose stock is up by 23% since the beginning of the year. Mr. Kolchinsky added the stock to his fund’s equity portfolio during the last three months of 2014 and the latest increase comes after Aurinia announced its participation in the Cowen and Company 35th Annual Health Care Conference at the beginning of March.
Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) is currently conducting a Phase 2b clinical trial of its drug, voclosporin, used for the treatment of lupus nephritis, which is an inflammation of the kidneys that can lead to renal disease. Another fund betting on Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) is Baker Bros. Advisors, led by Julian and Felix Baker, which holds around 727,700 shares as of the end of 2014. Baker Bros scored big earlier this month when its massive investment in promising biotech firm Pharmacyclics Inc (NASDAQ:PCYC) eclipsed $1.2 billion in returns for the year, following that company’s sale to AbbVie Inc (NYSE:ABBV).
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