Mark Lampert’s Biotechnology Value Fund recently filed its 13F with the U.S. Securities and Exchange Commission for the reporting period of March 31. The firm’s public equity portfolio stood $478.24 million, while it has $999.89 million in assets under management. Since its foundation in 1993, Biotechnology Value Fund has consistently worked to develop concentrated and long-term investments with a focus on small-cap biotechnology companies. Insider Monkey has a keen interest in the activities of the San Francisco-based investment firm and has been tracking its activities. In this article, we focus on three of its top small-cap picks, which are Array Biopharma Inc (NASDAQ:ARRY), Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD), and Forward Pharma A/S (NASDAQ:FWP).
Why are we interested in the 13F filings of a select group of hedge funds? We use these 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 142% over the last 33 months, which is more than 84 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).
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At the end of the first quarter, Biotechnology Value Fund held a total of 9.41 million shares of Array Biopharma Inc (NASDAQ:ARRY) valued at $69.32 million. This represented a decrease compared to the end of the fourth quarter of 2014 when it held a total of 11.77 million shares, although the value of the position has actually increased since then. That’s because shares of the biotechnology company, which recently sold its Longmont facility, chemistry, manufacturing and controls (CMC), to Accuratus Lab Services Inc, gained over 50% during the first quarter of the year. Array recently ranked 419 on a list of the fastest-growing companies released last year by Deloitte Technology Fast 500, with the firm having an annual revenue growth of 179%. Seven Wall Street analysts have given the stock an average short term price target of $11.00, signifying yet more upside of another 50%. Analysts will be keen to know whether the stock will pull a surprise like it did in its most recent quarterly report where it delivered a 42.11% earnings surprise factor. During the first quarter several other hedge funds had stakes in Array Biopharma Inc (NASDAQ:ARRY), including Jeremy Green’s Redmile Group and James E. Flynn‘s Deerfield Management. In total, 21 hedge funds out of the 730 actively reporting funds we track invested in the stock, having an aggregate investment of $446.26 million.
The 13F filing showed that Biotechnology Value Fund held a total of 2.17 million shares of Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) with a market value of $34.74 million, having heavily reduced its stake from 5.09 million shares held three months prior. The company on Monday announced its intention to offer $300 million of convertible notes, which are to mature on June 15, 2022, targeting mainly institutional buyers. The notes will only be availed subject to market and other relevant conditions. The fundamental intention of releasing the notes is to solidify its balance sheet, better its capital structure, and fund some of its corporate activities, which may include investing in other businesses or assets. Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) fell short of earnings estimates for the first quarter, having posted a loss of $0.24, $0.02 worse than expected. The stock currently has a one-year price target of $15.19, nearly 25% upside. At the end of the first quarter of 2015, 19 hedge funds we track had stakes in Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD), with the funds holding a total of $342.57 million in the company’s stock. They included Samuel Isaly‘s Orbimed Advisors, which emerged as the biggest shareholder among those we track, owning 12.01 million shares worth $192.19 million.
Lastly, Lampert’s fund held a total of 1.05 million shares of Forward Pharma A/S (NASDAQ:FWP) with a market value of $21.92 million. The stock has been overlooked by many investors, although analysts have been narrowing its projected losses for several months now, suggesting strengthening of the firm’s operations. Zacks analysts have given the stock a “Buy” rating, while RBC Capital Markets have given it an “Outperform.” Analysts from both firms see potential upside on the stock, which had already gained 84% year-to-date. Forward Pharma A/S (NASDAQ:FWP) posted a loss of $0.18 in earnings per share for the quarter, falling short of analysts’ consensus estimate by $0.01. At the end of the quarter, the company was sitting pretty with $206.4 million in cash, marketable securities, and cash equivalents, and with no outstanding debts. A total of 16 hedge funds in our database had stakes in Forward Pharma A/S (NASDAQ:FWP), with an aggregate investment of $255.23 million, among them Seth Klarman‘s Baupost Group.
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