Suvretta Capital Management is a young New York-based hedge fund founded by its current portfolio manager, Aaron Cowen, in 2012. Prior to founding Suvretta, Mr. Cowen honed his investment acumen working at two acclaimed large hedge funds: as a portfolio manager at Soros Fund Management, and as a CIO at SAC Capital. Prior to those positions, Mr. Cowen was a partner and managing director at Karsch Capital Management, where he was a noticeable part of the team that managed to raise the fund’s AUM more than ten-fold, to $3.3 billion. The Baupost Group, Fidelity Investments, and Lehman Brothers are also among his former employers. In 1994, Mr. Cowen graduated with a BS in Finance and a BSE in Bioengineering from the University of Pennsylvania, and in 2002, he earned an MBA from MIT Sloan School of Management.
What differentiates Suvretta Capital Management from other similar global long/short funds is its investment ideology which places industry before company. That comes from Mr. Cowen’s conviction that stock performance is influenced by industry conditions to at least the same degree that individual company performance is. The fund’s investment philosophy, which is therefore centered on analyzing industry dynamics, has proven to be wise, as the fund has had some fantastic results throughout the years.
Let’s take a look at the returns that Suvretta has managed over the years. Since its inception in September 2012 through the end of that year, the fund was up by 4.1%. 2013 was Suvretta Capital Management’s best year, as it delivered a return of 26.3%. In 2014 it had a return of 13.1%, while in 2015 it returned 7.1%. The fund’s worst year to date came in 2016, though it still had a positive return of 3.2%. Perhaps because of that underwhelming performance, the fund launched a long-only fund at the start of 2017. That turned out to be a good move, as last year was a favorable one for the fund, as it delivered a return of 24.32%, giving it an average return of 11.04% between 2015 and 2017, placing it among Barrons’ top 100 hedge funds list for 2018. The fund’s AUM stood at around $3.75 billion on January 3, 2017, and its 13F portfolio was valued at $3.77 billion on June 30, 2018.
Insider Monkey’s flagship strategy identifies the best performing 100 hedge funds at the end of each quarter and invests in their consensus stock picks. This way it is always invested in the best ideas of the best performing hedge funds and is able to generate much higher returns than the market. Since its inception in May 2014, our flagship strategy generated a cumulative return of 121% vs. a cumulative gain of 66.6% for the S&P 500 ETF (SPY) (see the details here).
On the next page, you can read about Suvretta Capital Management’s holdings as of the middle of 2018 and the changes it made to its portfolio in the second quarter.
Suvretta Capital Management’s largest position on June 30 was in San Francisco-based cloud computing company, Salesforce Com Inc (CRM), valued at $431.04 million and counting 3.16 million shares. The fund actually decreased its stake in this company by 8% during the second quarter. That was in contrast to the smart money investors from our database, who were quite bullish on Salesforce. The company’s stock was held by 82 investors in our system at the end of June, making it more popular than many other companies with similar market caps. The second-largest position in Suvretta Capital Management’s 13F portfolio at the end of June was Adobe Systems Inc (ADBE), being worth around $374.05 million and containing 1.53 million shares. This was another stock in which the fund lowered its position from its previous 13F, by 10%.
The two largest new investments the fund made in the second quarter were in Baxter International Inc (BAX) and Marathon Petroleum Corp (MPC), worth $202.84 million (2.75 million shares) and $180.69 million (2.56 million shares), respectively. Both companies seem like attractive investments at the moment, considering seeing their popularity among the smart money investors tracked by Insider Monkey’s database. Even though Baxter International Inc (BAX) ownership fell by a net total of seven investors during the second quarter, 41 of them still hold long positions which is quite good compared to other companies with similar market caps. As for Marathon Petroleum Corp (MPC), hedge funds are becoming even more bullish on it, with 59 long the stock at the end of June, versus 43 at the end of March.
Some of the most valuable positions Suvretta Capital Management decided to drop during Q2 included its holdings in Alphabet Inc. (GOOG), Altaba Inc (AABA), and JPMorgan Chase & Co (JPM). Its position in Alphabet Inc. (GOOG) was formerly one of its largest, valued at $285.19 million on March 31, counting 276,400 shares. Suvretta also dumped investment company Altaba (consisting of former Yahoo! Inc. assets) during Q2, selling off the 3.13 million shares that it held on March 31.
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