Zweig-DiMenna Partners is a US-based hedge fund managed by Joseph A. DiMenna, who co-founded the fund with Martin Zweig back in 1984. Zweig-Dimenna Partners is considered one of the pioneers in short, long and alternative investing and is focused on technology, services and healthcare sectors. According to its latest 13F filing, Zweig has an equity portfolio valued at around $2.39 billion, with stakes in healthcare companies amassing around 23%. In this article we will take a look at Zweig’s top healthcare picks: Medtronic PLC (NYSE:MDT), Actavis plc (NYSE:ACT), Valeant Pharmaceuticals Intl Inc (NYSE:VRX), and Bristol-Myers Squibb Co (NYSE:BMY).
One of the main reasons for following equity portfolios of some of the best-performing hedge funds is because we believe that we can take some investment opportunities by analyzing the stocks in which these funds invest their capital. Even though the 13F filings of large investors are published with a significant delay, it does not offset opportunities to invest in the same stocks. The key is to focus on their small-cap picks, as we determined through a series of backtests for the period between 1999 and 2012. The backtests showed that a portfolio of the 15 most popular small-cap stocks among several hundred investors managed to beat the market by an average of nearly a percentage point per month. This system has showed the same strong returns after going live, having gained around 137% in the last 2.5 years, outperforming the S&P 500 ETF (SPY) by some 82 percentage points (read more details here).
The first company in our list is Medtronic PLC (NYSE:MDT), in which Zweig-Dimenna Partners held some 1.10 million shares with a total value of $85.81 million. Medtronic PLC (NYSE:MDT) is a $112 billion company that develops diagnostic and medical products. Its stock is up by 8% year-to-date amid the acquisition of Covidien, an Irish producer of medical devices. The combination of the two companies is expected to create one of the leading companies in the industry, which will be able to amass significant market shares due to the strength of both firms. In the preliminary financial results for the quarter ended last month, Medtronic PLC (NYSE:MDT) already posted a 60% revenue growth on the year to $7.30 billion and earnings at the upper end of the $1.08 – $1.13 range forecasted previously. Billionaire Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group reported holding 2.37 million shares and 1.24 million shares respectively. However, in their equity portfolios, the positions in Medtronic PLC (NYSE:MDT) amass less than 0.40%, versus 3.59% in Zweig’s portfolio.
The investor also disclosed holding around 238,400 shares of Actavis plc (NYSE:ACT), valued at $70.94 million. During the first quarter, Zweig upped its position in Actavis by 58%, joining a large list of investors that are bullish on the company. In fact, Actavis is the most popular stock among more than 700 hedge funds from our database with 157 funds disclosing ownership of $21.97 billion of the company’s stock, jumping two positions in our ranking during the first three months of 2015. Actavis plc (NYSE:ACT) is one of the largest pharmaceutical companies with a large portfolio of generic and original drugs, which explains why investors are fond of the stock. Among the top shareholders of Actavis plc (NYSE:ACT) are Andreas Halvorsen’s Viking Global, Daniel S. Och’s OZ Management and Dan Loeb’s Third Point, which held 6.11 million shares, 3.66 million shares and 3.58 million shares respectively. All three investors increased their exposure to the company during the first quarter.
Zweig-Dimenna Partners also holds 210,900 shares of Valeant Pharmaceuticals Intl Inc (NYSE:VRX) valued at $41.89 million. Valeant Pharmaceuticals is a Canadian pharmaceutical company that is focused on infectious diseases, dermatology and neurology. The second-largest shareholder of the company is Bill Ackman’s Pershing Square, which owns 19.47 million shares, valued at $3.87 billion. At the beginning of May, Ackman said at the Sohn Conference that Valeant Pharmaceuticals Intl Inc (NYSE:VRX)’s stock should be valued at $330 per share and compared the company to an early-stage Berkshire Hathaway. Another large shareholder of Valeant Pharmaceuticals Intl Inc (NYSE:VRX) is Jeff Ubben’s ValueAct Capital, which owns 19.38 million shares.
Next on the list is Bristol-Myers Squibb Co (NYSE:BMY), in which Zweig-Dimenna Partners held 583,942 shares worth $37.66 million at the end of March. Bristol-Myers Squibb Co is a biopharmaceutical company that develops and discovers innovative medicines for patients with serious diseases, whose stock gained more than 15% since the beginning of the year. Bristol-Myers Squibb Co (NYSE:BMY) posted a first quarter revenue of $4.04 billion, versus $3.81 billion a year earlier, while its earnings per share increased by 34% on the year to $0.71. The revenue growth was impacted by stronger sales of some of Bristol-Myers Squibb Co (NYSE:BMY)’s main drugs, such as immunotherapeutic drugs. Among the funds we track, the largest shareholders of Bristol-Myers are Samuel Isaly’s Orbimed Advisors and Phill Gross and Robert Atchinson’s Adage Capital Partners, which own 8.88 million shares and 7.05 million shares respectively.
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