Sector Concerns Not Scaring Clifford Fox Away From These 5 Healthcare Stocks

Clifford Fox’s Columbus Circle Investors is a multi-billion dollar investment management firm that has been primarily successful in picking small-cap and mid-cap stocks over the years. The investment firm employs a growth-based long/short investment strategy with a strong focus on the U.S equity markets. Its small-cap portfolio had generated an annualized return of 16% over the past ten years through June 30, while the Russell 2000 Growth Index returned 9.9% over the same time span. However, the bloody third quarter left its mark on the firm’s portfolio, with its market value declining to $12.23 billion from $14.15 billion quarter-over-quarter. Unquestionably, Columbus Circle Investors undertook a serious re-balancing process during the latest quarter, so we thought it would be worthwhile to take a look at its most prominent healthcare stock picks, as revealed through the firm’s 13F filing for the September quarter. The healthcare sector showed noticeable signs of weakness throughout the latest quarter, so let’s see which healthcare stocks Clifford Fox and his team put their faith in coming out of it.

Syda Productions

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 102% over the last 37 months, which is more than 53 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).

#5 DexCom Inc. (NASDAQ:DXCM)

Shares Owned by Columbus Circle Investors (as of September 30): 1.25 million shares

Value of Holding (as of September 30): $107.23 million

Columbus Circle Investors put more faith in DexCom Inc. (NASDAQ:DXCM) during the third quarter, as it increased its stake in the company by 321,935 shares. The shares of the glucose-monitoring company gained 7% during the September quarter despite suffering a serious pullback at the end of the three-month period. The yearly stock performance of the company has been even stronger, with its shares advancing by 53% year-to-date. Yesterday the company reported third quarter revenue of $105.2 million, which marked an increase of 52% year-over-year. However, its GAAP net loss widened to $42.5 million, from a loss of $5.2 million reported in the same quarter last year. Israel Englander’s Millennium Management owned nearly 499,000 DexCom Inc. (NASDAQ:DXCM) shares on June 30.

#4 Edwards Lifesciences Corp (NYSE:EW)

Shares Owned by Columbus Circle Investors (as of September 30): 975,221 shares

Value of Holding (as of September 30): $138.65 million

Columbus Circle Investors increased its exposure to Edwards Lifesciences Corp (NYSE:EW) during the third quarter as well, augmenting its position by 10,664 shares. The medical equipment company specializing in artificial heart valves and hemodynamic monitoring has seen its stock gain 23% since the beginning of the year. At the end of October, Edwards Lifesciences revealed its stronger-than-expected financial results for the third quarter and raised its full-year earnings guidance. The strong demand for its replacement heart valves, which exceeded the company’s expectations, played a crucial role in the delivery of the strong financial performance. Edwards Lifesciences’ global sales climbed by 1.3% year-over-year to $615.5 million, while its diluted earnings per share increased by 23% to $1.07. From the massive pool of hedge funds tracked by Insider Monkey, Cliff Asness’ AQR Capital Management was the top equity holder of Edwards Lifesciences Corp (NYSE:EW) at the end of the June quarter, holding 2.40 million shares.

#3 Allergan PLC (NYSE:AGN)

Shares Owned by Columbus Circle Investors (as of September 30): 836,352 shares

Value of Holding (as of September 30): $227.33 million

Allergan PLC (NYSE:AGN) did not have a great third quarter in terms of stock performance, with its shares losing slightly over 10% during the three-month period. Nevertheless, the stock has gained almost 8% since the beginning of October, extending its year-to-date return to 19%. The Connecticut-based investment firm sold off a portion of its stake in the pharmaceutical company during the third quarter. Specifically, Columbus Circle Investors reduced its position in the company by 89,319 shares. It is also worth pointing out that Allergan was the most popular stock among the hedge funds tracked by Insider Monkey at the end of the June quarter. A whopping 151 top money managers were invested in the stock on June 30, with Paulson & Company, founded by John Paulson in 1994, being one of the top equity holders among them. The hedge fund firm owned 7.17 million shares in Allergan PLC (NYSE:AGN).

#2 Bristol-Myers Squibb Co (NYSE:BMY)

Shares Owned by Columbus Circle Investors (as of September 30): 3.95 million shares

Value of Holding (as of September 30): $233.61 million

Bristol-Myers Squibb Co (NYSE:BMY) made the list of Columbus Circle Investors’ ten largest equity holdings at the end of the third quarter. In fact, the Connecticut-based firm was quite bullish on the biopharmaceutical company during the September quarter, as it lifted its stake in the company by 336,398 shares. Earlier this week, the New York-based company announced an agreement to acquire private biotech company Cardioxyl Pharmaceuticals for approximately $2.07 billion. The latter company focuses on cardiovascular disease and develops product candidates that release nitroxyl, a molecule that enhances the function of the heart muscle and has beneficial effects on vascular function. The shares of Bristol-Myers Squibb are slightly more than 11% in the green year-to-date. Samuel Isaly’s OrbiMed Advisors held a 7.75 million-share position in Bristol-Myers Squibb Co (NYSE:BMY) at the end of the second quarter.

#1 Gilead Sciences Inc. (NASDAQ:GILD)

Shares Owned by Columbus Circle Investors (as of September 30): 3.47 million shares

Value of Holding (as of September 30): $341.13 million

Gilead Sciences Inc. (NASDAQ:GILD) represents the second-largest equity holding and the largest healthcare-related position of Columbus Circle Investors as of the end of the third quarter. Nevertheless, the investment firm decreased its position in the biopharmaceutical company by 88,337 shares during the latest quarter. Gilead Sciences, the largest biotech company by market capitalization, has seen its shares gain 17% year-to-date despite experiencing two major pullbacks over the past three-month period. Even so, the stock is currently trading at a very attractive level, considering its trailing P/E ratio of only 11.44. However, the growing competition and worries about drug pricing might somewhat explain the cheap valuation. Just recently, the company’s Board of Directors approved a fourth quarter cash dividend of $0.43 per share, providing a current dividend yield of 1.58%. Jim Simons’ Renaissance Technologies owned 1.31 million shares of Gilead Sciences Inc. (NASDAQ:GILD) on June 30.

Disclosure: None