Bourgeon Capital Management Reveals Top Picks for Q3, With JPMorgan Chase & Co. (JPM) Leading the Pack

Bourgeon Capital Management LLC, founded by John A. Zaro in 1999, operates as a boutique investment counseling firm that aims to serve high net-worth individuals and their families far better than large investment companies. The Connecticut-based asset manager predominantly seeks to invest in companies with strong management teams, healthy balance sheets, and growing cash flows. Precisely, Mr. Zaro’s investment firm attempts to find good companies encountering short-term difficulties that offer attractive investment opportunities over a long-term horizon.

Prior to starting his own firm, Mr. Zaro served as senior managing director and partner at Warburg Pincus Asset Management, served as a portfolio manager and alpha target manager for J.P. Morgan Investment Management, and worked at Morgan Stanley, Jefferies & Company, and Smith Barney. Bourgeon Capital oversees a diversified long-only equity portfolio worth $154.05 million at the end of the second quarter. The boutique investment firm’s ten largest holdings accounted for approximately one-third of its equity portfolio. Without further ado, let’s have a look at the five largest equity holdings within Bourgeon Capital’s portfolio as of the end of June.

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).

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#5. Becton Dickinson and Co (NYSE:BDX)

 – Shares Owned by Bourgeon Capital (as of June 30): 29,265

 – Value of Bourgeon Capital’s Holding (as of June 30): $4.96 Million

Bourgeon Capital Management owns 29,265 shares of Becton Dickinson and Co (NYSE:BDX) as of the end of the second quarter, 370 shares more than it did at the end of the first quarter. The upped stake was worth $4.96 million on June 30 and accounted for 3.2% of the value of the investment firm’s equity portfolio. The shares of the medical technology company engaged in the development and sale of a wide portfolio of medical supplies, devices, laboratory equipment, and diagnostic products are up by 14% thus far in 2016. The company’s multi-billion-dollar acquisition of medical technology company CareFusion in late-March of 2015 doubled the size of Becton’s medical products division. Becton Dickinson reported revenue of $3.07 billion for the first three months of 2016, up by 49.6% year-over-year, with the increase reflecting the addition of $1.02 billion in CareFusion revenue. Revenue growth for the company’s legacy operations was predominantly driven by volume, and was offset by foreign currency headwinds. Jim Simons’ Renaissance Technologies owned roughly 755,000 shares of Becton Dickinson and Co (NYSE:BDX) at the end of March.

#4. Merck & Co. Inc. (NYSE:MRK)

 – Shares Owned by Bourgeon Capital (as of June 30): 87,250

 – Value of Bourgeon Capital’s Holding (as of June 30): $5.03 Million

The Connecticut-based asset manager reduced its exposure to Merck & Co. Inc. (NYSE:MRK) by 1,200 shares during the three-month period ending June 30, to 87,250 shares. Fresh media reports suggest that the New Jersey-based drugmaker is interested in acquiring biotechnology giant Biogen Inc. (NASDAQ:BIIB), raising the prospect of yet another mega-deal in the healthcare space. Biogen dominates the market for multiple-sclerosis drugs and spent heavily on developing potential treatments for Alzheimer’s, so a possible acquisition of Biogen would enable Merck to inject freshness into its top-line growth. In early-June, Merck agreed to acquire privately-held pharmaceutical company Afferent Pharmaceuticals for an upfront payment of $500 million in cash and additional milestone payments of up to $750 million. Afferent’s lead drug candidate is designed as a possible treatment for chronic refractory cough and idiopathic pulmonary fibrosis with cough. Merck shares are 10% in the green year-to-date. HealthInvest Partners AB, founded by Anders Hallberg and Carl Bennet, owns 224,100 shares of Merck & Co. Inc. (NYSE:MRK) as of June 30.

The next page of this article will reveal three other stocks favored by Bourgeon Capital.