Edwards Lifesciences Corp (NYSE:EW) was one of the top gainers in Monday trading and closed 9% in green after it reported that 30-day outcomes for high- and intermediate-risk patients treated with its SAPIEN 3 transcatheter aoirtic valve showed the lowest all-cause mortality rates of any of the PARTNER studies. The stock of the developer of technologies for the treatment of heart diseases is already up by 109% over the last 52 weeks and it attracts more and more attention from investors. One of the funds that will beneift the most from Edwards’ growth is David Blood and Al Gore‘s Generation Investment Management, which holds around 4.19 million shares of the company; the $553.61 million stake is the fund’s second largest in terms of value. Moreover, Generation is one of the largest shareholders of Edwards Lifesciences Corp (NYSE:EW) among institutional investors.
As the company added in its statement, its SAPIEN 3 valve is the most advanced transcatheter aortic valve and is scheduled for launch in early 2016. Edwards Lifesciences Corp (NYSE:EW)’s stock gained around 16% since the beginning of the year, amid the compay reporting great financial results for the fourth quarter and full year 2014. Due to a high demand of heart valves, its revenue in the fourth quarter surged to $618 million, from $536 million a year earlier. Moroever, for the full year, the revenue appreciated by around 13% on the year to $2.32 billion. The revenue growth during the last year, helped Edwards Lifesciences to drive its profits higher to $7.48 per diluted share, versus $3.44 per share in 2013. For the current year, the company expect diluted EPS between $4.00 and $4.30, excluding special items, versus reported $3.50 for 2014.
Generation Investment Management (GIM) is a long-only equity fund that invests with a long-term horizon. Messrs. Blood and Gore are focused on investing in companies that are socially and environmentally responsible and sport good corporate governance policies. Prior to founding GIM, Mr. Blood worked as Chief Executive Officer of Goldman Sachs Asset Management. Mr. Gore is a former Vice President of the United States and works one day a week for the fund, being also engaged in several philantropic and environmental projects.
At the end of 2014, GIM reported an equity portfolio valued at $6.96 billion, with a strong focus on Technology and Healthcare stocks, which in aggregate represent almost 80% of the total value. The fund’s bullish sentiment towards these sectors can also be observed from taking a look at the fund’s larges holdings, top three of which are represented by Check Point Software Technologies Ltd. (NASDAQ:CHKP), Edwards Lifesciences Corp (NYSE:EW), and QUALCOMM, Inc. (NASDAQ:QCOM).
However, investing in the same companies in which GIM has its largest stakes might not be a good idea for retail investors. If we take a look at average returns of equity hedge funds in the last three years, we can see that they returned around 1.4% in 2014, 11.1% in 2013, and 4.8% in 2012. This returns are very low in comparison with the S&P 500 ETF (SPY), which appreciated by 13.5%, 32.3% and 16% during the same years. However, this low performance is mainly due to the fact that the majority of large hedge funds invest in large-cap stocks, as our backtests showed that an equally weighted portfolio that consists of 50 most popular picks among hedge funds underperformed the market by around 7.0 basis points per month between 1999 and 2012. On the other hand, our small-cap strategy, based on most popular stocks with market cap between $1.0 and $5.0 billion among over 700 hedge funds, returned 132% between August 2012 and March 2015, outperforming the market by over 79 percentage points.
Nevertheless, let’s take a more detailed look at GIM’s three largest holdings, since all three stocks provided strong returns over the long term. In Check Point Software Technologies Ltd. (NASDAQ:CHKP), the fund reported holding 7.11 million shares, valued at $558.39 million. The position was opened during the last quarter of 2013 and initially contained only 2.11 million shares, but was consequently increased as the stock appreciated by over 21% during 2014. With several hacker attacks launched last year on JP Morgan, Target, and Home Depot, concerns over IT Security could have a significant impact on security software sales and Check Point Software Technologies Ltd. (NASDAQ:CHKP) could be one of the companies to benefit from that. Among the investors that we track, Ken Griffin of Citadel Investment Group is also bullish on Check Point Software Technologies Ltd. (NASDAQ:CHKP). The fund added 1.80 million shares to its stake during the third quarter, taking it to 1.83 million shares.
Edwards Lifesciences Corp (NYSE:EW) remained on the second spot in GIM’s equity portfolio, even though the fund unloaded around 1.38 million shares during the last quarter. It was the first sale after the stake was initiated during the first quarter and contained 2.38 million shares. The company saw a significant inflow of capital from investors during the fourth quarter as 35 funds reported holding $1.44 billion worth of stock, versus $1.05 billion in the previous quarter. Cliff Asness‘ AQR Capital Management is among the funds that boosted their stakes in Edwards Lifesciences Corp (NYSE:EW) during the fourth quarter, doubling its stake to 1.38 million shares.
In comparison with Check Point Software Technologies Ltd. (NASDAQ:CHKP) and Edwards Lifesciences, QUALCOMM, Inc. (NASDAQ:QCOM) represents a more long-term position, being included in GIM’s equity portfolio since the first quarter of 2010. During the last five years, the investor raised its stake in the company to 6.74 million shares, from 2.06 million shares held initially, while the stock gained around 67% during this period. At the end of 2014, the position was valued at $501.21 million, moving down to the third spot from the first as the fund sold around 963,700 shares during the last three months of last year. The chipmaker might take a hit soon as it has been recently speculated that Apple Inc. (NASDAQ:AAPL) is switching to Intel Corporation (NASDAQ:INTC) to deliver its wireless modem chips, which will partially replace QUALCOMM, Inc. (NASDAQ:QCOM)’s chips that have been used in the past. Amid such rumors, investors seem to be more pesimistic about QUALCOMM, Inc. (NASDAQ:QCOM)’s prospects, as the number of funds holding shares of the company among those that we track fell to 61 during the fourth quarter from 75 a quarter earlier. Sandy Nairn’s Edinburgh Partners holds 1.62 million shares as of the end of 2014.
Disclosure: none
