Hedge Funds Are Buying Shares of These Two Bio-tech Stocks; Should You?

Is it a good time to buy Kite Pharma Inc (NASDAQ:KITE)? Andreas Halvorsen seems to think so, having recently increased his holding of the stock. As reported in a recent filing with the Securities and Exchange Commission, Halvorsen’s fund, Viking Global, is now owning 2.68 million shares, up from 677,334 shares reported in its latest 13F filing. As a result, Halvorsen now controls 6.1% of Kite Pharma’s outstanding stock. In another filing, Roberto Mignone‘s Bridger Management has disclosed an increase in its holding of TG Therapeutics Inc (NASDAQ:TGTX) to 3.15 million shares or 6% of the company’s common stock. Hedge funds are optimistic about the prospects of Kite Pharma, but have reservations towards TG Therapeutics.

One of the most successful Tiger cubs, a nickname given to protégés of the hedge fund legend Julian Robertson, Andreas Halvorsen founded Viking Global in 1999 with two Tiger colleagues and has grown it into a behemoth with an equity portfolio worth in excess of $26 billion. His stock picks are well spread among a number of sectors with 33% of funds invested in the healthcare sector and 17% invested in tech stocks. Walgreens Boots Alliance Inc (NASDAQ:WBA) became Halvorsen’s new favorite stock at the end of June, following a 69% increase in Viking’s holding of the stock to 24.6 million shares during the second quarter. He is also bullish on Alphabet Inc (NASDAQ:GOOGL), Class A stock of Google’s new holding company, having boosted his stake by 67% during the quarter to amass 2.73 million shares. Illumina, Inc. (NASDAQ:ILMN) seems to have lost the appeal in the eyes of Halvorsen, who dumped 42% of his stake and left Viking Global holding 4.96 million shares at the end of the quarter.

Why are we interested in the moves of a select group of hedge funds? We are in fact more interested in their 13F filings, to determine the top 15 small-cap stocks held by these elite funds based on 16 years of research that showed their top small-cap picks are much more profitable than both their large-cap stocks and the broader market as a whole; yet investors have been stuck (until now) investing in all of a hedge fund’s stocks: the good, the bad, and the ugly. Why pay fees to invest in both the best and worst ideas of a particular hedge fund when you can simply mimic the best ideas of the best fund managers on your own? These top small-cap stocks beat the S&P 500 Total Return Index by an average of nearly one percentage point per month in our backtests, which were conducted over the period of 1999 to 2012. Even better, since the beginning of forward testing at the end of August 2012, the strategy worked just as our research predicted and then some, outperforming the market every year and returning 118% over the last 36 months, which is more than 60 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).

Among the hedge funds that we follow, Leonard A. Potter‘s Wildcat Capital Management is the largest shareholder of Kite Pharma Inc (NASDAQ:KITE), having reported ownership of 2.35 million shares in its latest 13F filing. Christopher Medlock James seems optimistic about the prospects of the company, having increased his investment by 76% during the second quarter to 309,152 shares. Guy Shahar is also keeping tabs, with his fund, DSAM Partners, reportedly holding 342,188 shares as of June 30. In general, hedge fund sentiment towards Kite Pharma has registered a modest boost during the quarter, with the number of funds invested in the stock having increased to 22 from 21 at the end of March. Accounting for 10.5% of the company’s common stock, the aggregate value of their holdings carried a value of $276 million, up by 6.6% during the quarter.

Kite Pharma Inc (NASDAQ:KITE) focuses on the development of novel cancer immunotherapy products and has registered their first revenues in the beginning of this year. For the three months ending June 30, the company posted a loss of $0.48, down from $0.78 a year ago, on the back of $4.4 million in revenues. Wall Street expects a slight decline in revenues to $4.06 million and a loss of $0.57 per share for the current quarter. Analysts at Standpoint Research and Maxim Group have recently initiated coverage on Kite Pharma and have assigned a Buy rating with price targets of $100 and $87 respectively.