One Fund is Buying This Biotech Stock Although It’s Losing Smart Money’s Support

Alex Denner is still bullish on Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR) and has further increased his stake in the company. As reported in a recent filing with the Securities and Exchange Commission, Denner’s fund, Sarissa Capital Management, now holds 2.35 million shares of Aegerion, up from the 2.03 million shares reported in its latest 13F filing. As a result, Denner and Sarissa have control over approximately 8.23% of Aegerion’s common stock. However, during the second quarter of 2015, the popularity of Aegerion among the hedge funds in our database has slightly decreased.

Alex Denner started Sarissa Capital Management in 2012 following successful spells at Andreas Halvorsen’s Viking Global and Icahn Capital. During his five-year stint as Carl Icahn’s top healthcare investing officer, Denner managed to bring in a profit of roughly $2 billion by picking bio-technology stocks, during a time when most investors shunned them mainly because of regulatory hurdles. After starting Sarissa Capital, he stuck to his guns and is investing almost exclusively in healthcare stocks, overseeing an equity portfolio with an estimated value of $434 million at the end of June. During the second quarter, Denner has made only a few changes to his holdings, most notable being the 26% reduction of his stake in Quest Diagnostics Inc (NYSE:DGX), Sarissa’s third largest position, to 575,000 shares. He also dumped nearly 40% of the fund’s stake in Amgen, Inc. (NASDAQ:AMGN), leaving Sarissa with exactly 200,000 shares, according to its latest 13F filing. The Medicines Company (NASDAQ:MDCO) was still on Denner’s acquisition list, with his fund reporting a 13% increase in its holding to 1.36 million shares by the end of the second quarter.

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 funds 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 small-cap stock picks in real time since the end of August 2012. These stocks have returned 118% since then and outperformed the S&P 500 Index by around 60 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.

Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR) is among the top 10 holdings of Kevin Kotler, another bio-tech enthusiast. During the second quarter, Kotler increased his fund’s stake in the company by 14% to amass 2.85 million shares, according to Kotler’s Broadfin Capital’s latest 13F filing. The biggest stake in Aegerion among the hedge funds we track is held by Scopia Capital, run by Matt Sirovich and Jeremy Mindich, who have boosted their investment to more than 5.42 million shares during the second quarter. Israel Englander of Millennium Management is also a fan of this stock and has stepped up his interest during the quarter, taking his investment to a little over 1.50 million shares. During the second quarter, the popularity of Aegerion among the hedge funds we follow has slightly weakened, with the number of funds invested in the stock dropping to 16, from 18, and, although, the total value of their holdings has decreased by approximately 22% to $266 million, funds still control 49.2% of the company’s common stock.

So far this year, Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR) has lost roughly a third of its value and is currently trading at $13.78, which implies a market cap of $394 million. 2015 second quarter revenues came in at $64.2 million, up by a whooping 78% year-over-year, although the loss per share has widened to $0.39 from $0.33 per share reported a year ago. Wall Street is not very optimistic about the current quarter, expecting revenues of $59.7 million and a loss of $0.42 per share. At the end of July, Jeffries has upgraded Aegerion stock to ‘Buy’ from Hold and has assigned a price target of $26 per share.

Disclosure: none.