Justin John Ferayorni’s Tamarack Capital has released its 13F filing for the reporting period of June 30. The hedge fund, which primarily invests in healthcare stocks, was founded by Ferayorni in 2005 after he worked as a portfolio manager and analyst at Bricoleur Capital. At the end of the second quarter, the fund had a public equity portfolio valued at $869.74 million, up from $759.00 million at the end of the first quarter. Interestingly, Tamarack Capital’s 13F portfolio represents 289.91% of assets under its management. While the fund is invested in many stocks, its top ten stocks account for 66.83% of its portfolio value. From the fund’s activities during the quarter, it became apparent that it is quite enamored with medical device makers at the moment. In this article, we will take a look at the top three picks from its portfolio, which are Endologix, Inc. (NASDAQ:ELGX), Becton, Dickinson and Co. (NYSE:BDX), and Quest Diagnostics Inc (NYSE:DGX).
We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular stock picks in real time since the end of August 2012. These stocks have returned 123% since then and outperformed the S&P 500 Index by around 65 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.
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Let’s now have a look at Endologix, Inc. (NASDAQ:ELGX), which sits at the top of Tamarack Capital’s portfolio in terms of long positions going into the third quarter of 2015. At the end of the second quarter, the fund held 4.05 million shares of the company, with a value of $62.13 million, representing 7.14% of its portfolio value. The Irvine, California-based company recently saw some insider trading activity in the form of an insider sale of 1,250 shares at an average price of $12.60, with the shares having been unloaded by James Machek, the company’s VP of Research & Development. The company’s performance year-to-date stands at a loss of 12.88% despite its promising industry. Endologix, Inc. (NASDAQ:ELGX) recently announced enormous progress in Pivotal Trial of investigational device exemption (IDE) that it sponsors. The study seeks to establish how effective Nellix EndoVascular Aneurysm Sealing System is for repairing infrarenal abdominal aortic aneurysms. Success of the full study will be a big milestone for the company, particularly in the U.S., where the Nellix EVAS System is only approved for use in testing. At the end of the second quarter, Rail-Splitter Capital Management, managed by John Croghan and Richard Fradin, sold off its former position of 186,076 shares, apparently not feeling quite as positive about its prospects as Tamarack Capital.
Another medical device maker, Becton, Dickinson and Co. (NYSE:BDX), came in second in Tamarack Capital’s portfolio, with the fund holding 400,000 shares of the company, valued at $56.66 million. This was after the fund upped its stake in the company by 74% during the quarter. In June, Becton, Dickinson and Co. (NYSE:BDX) announced a partnership with Medtronic PLC (NYSE:MDT) to introduce a new insulin pump infusion set to the market, using the BD FlowSmart technology. The pump is already approved by the FDA and Health Canada, and is aimed at improving the treatment of type 1 diabetes. The company recently announced a dividend of $0.60 per share for stockholders of record as of September 9, 2015, payable on September 30, 2015. At the end of the second quarter, Pzena Investment Management, headed by Richard S. Pzena, held a total of 373,824 shares with a value of $52.95 million. Mario Gabelli’s GAMCO Investors on the other hand held a total of 325,013 shares of the company valued at $46.04 million after selling 62,134 shares during the quarter.
Third on Tamarack Capital’s top picks is Quest Diagnostics Inc (NYSE:DGX), of which it held 700,000 shares with a market value of $50.76 million on June 30, after raising its stake in the company by 75% during the second quarter. The company recently released its second quarter earnings results, which beat analysts’ consensus estimates. Quest Diagnostics Inc (NYSE:DGX) posted diluted earnings per share, excluding extraordinary items, of $0.81 on revenue of $1.93 billion. The revenue was slightly higher than the $1.93 billion that analysts expected. The stock has gained 8.19% year-to-date and is up by 19.92% over the past year. At the end of the second quarter, Polaris Capital Management, managed by Bernard Horn, held a total of 183,397 shares with a value of $13.30 million. David Harding’s Winton Capital Management owned a total of 164,233 shares valued at $11.91 million, though it trimmed its stake by 333,377 shares during the quarter.
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