March Altus Capital Management, headquartered in Greenwich, Connecticut, was founded by Neil Shah in December 2011.This healthcare focused fund follows bottom-up fundamental analysis to make its investments. Based on the recent 13F filing, March Altus Capital Management disclosed an equity portfolio of $218.9 million with 93% of its investments in the healthcare sector.
As a part of our small-cap strategy, we analyze the equity portfolios of over 700 hedge funds, because we believe that hedge fund managers are still some of the best stock pickers, even though in the last couple of years many of them have not delivered any alpha. Through a series of backtests, we determined that a portfolio of the 15 most popular small-cap picks among hedge funds managed to outperform the market by 1.0 percentage points per month, while the most popular large-cap picks underperformed the market by around 7.0 basis points between 1999 and 2012. Another point that supports the successful outcome of our strategy are the gains of 132% in the last 2.5 years, which beat the S&P 500 ETF (SPY)’s returns by around 80 percentage points (read more details here).
Most stocks from March Altus Capital Management’s equity portfolio had a strong performance during the first quarter as 17 long positions represented by companies with a market cap above $1.0 billion had a weighted average return of 10.98%. Moreover, the fund’s top five picks posted an average return of 16.2% in the first quarter 2015, while the S&P 500 ETF (SPY) gained 0.9% during the same period. According to the latest 13F filing, United Therapeutics Corporation (NASDAQ:UTHR), DexCom Inc. (NASDAQ:DXCM) and Mallinckrodt PLC (NYSE:MNK) represented the top three positions in the fund’s portfolio. The investment’s paid off well, as these top three stocks surged over 91.9% (United Therapeutics), 90.1% (DexCom) and 100.2 % (Mallinckrodt) respectively, in the last 52 weeks.
Neil Shah’s highest position at the end of 2014 was represented by United Therapeutics Corporation (NASDAQ:UTHR), a biotechnology company, which accounted 6.8% of the fund’s equity portfolio. The position holds 115,077 shares, down by 33% on the quarter, valued at $14.9 million as of the end of 2014. United States Food and Drug Administration (FDA) approved a new United Therapeutics Corporation (NASDAQ:UTHR)’s product in March 2015, for the treatment of high-risk neuroblastoma among pediatric patients. Analysts foresee a new revenue stream and company’s expansion through this new product offering, from its relatively small pulmonary arterial hypertension market. The stock of United Therapeutics Corporation (NASDAQ:UTHR) advanced by 33.17% during first quarter 2015. The largest shareholder of United Therapeutics Corporation (NASDAQ:UTHR) among the funds that we track is Matt Sirovich and Jeremy Mindich’s Scopia Capital with 2.96 million shares worth $382.97 million. Other major investors are Palo Alto Investors and Amici Capital.
On the second spot in Neil Shah’s equity portfolio is its position in DexCom, Inc. (NASDAQ:DXCM), which comprises 6.71% of the equity portfolio and contains 267,076 shares, valued at $14.7 million. The stock of this $5.4 billion market cap company rallied by over 13.24% during the first quarter of 2015, as the firm has been receiving several approvals from the FDA, with the recent major one being DexCom Share, the first FDA-approved mobile remote monitoring system. Moreover, DexCom, Inc. (NASDAQ:DXCM) reported a profit for the first time in its history for the fourth quarter of 2014. The company reported a net income of $1.3 million, or $0.02 per share for the fourth quarter of 2014, as compared to a net loss of $2.6 million, or $0.04 per share for the same period in 2013. Donald Chiboucis’s Columbus Circle Investors and Drew Cupps’ Cupps Capital Management are two large shareholders of DexCom, Inc. (NASDAQ:DXCM), holding some 771,900 shares and 436,000 shares respectively.
The stock of Mallinckrodt PLC (NYSE:MNK) also enjoyed a strong first quarter, advancing by 27.89%. In Neil Shah’s equity portfolio the stake in Mallinckrodt constituted 6.56% and contained 145,071 shares worth $14.4 million. The company’s first quarter fiscal 2015 revenue amounted to $866.3 million, as compared to $540.2 million in the first quarter of fiscal 2014. Mallinckrodt reported EPS of $1.84 for the first quarter of fiscal 2015, which was above the analysts expectations of $1.55. John Paulson’s Paulson & Co owned over 9.0 million shares of the company with a value of $892.5 million. Adage Capital Management and Broadwood Capital also reported large stakes in the company in their latest 13F filings.
Universal Health Services, Inc. (NYSE:UHS) represents the fund’s fourth largest position, the stake amassing 122,900 shares, valued at $13.7 million as of the end of 2014. Neil Shah increased the fund’s stake in the company by 33% during the fourth quarter of 2014. The stock of Universal Health Services, Inc. (NYSE:UHS) appreciated by 5.9% in the first quarter of 2015, as the company reported better than expected results for the fourth quarter, with revenues of $2.10 billion, beating the consensus estimate of $2.04 billion. Universal Health Services’ management expects 6% to 13% increase in the adjusted net income for the current year, as compared to the adjusted net income of $5.78 per diluted share in 2014. Jacob Doft’s Highline Capital Management is the largest shareholder of the company among the funds that we track, holding 909,700 shares, valued at $101.2 million. Other major investors in Universal Health Services, Inc. (NYSE:UHS) are Lee Ainslie’s Maverick Capital and Israel Englander’s Millennium Management, holding 834,800 shares and 735,200 shares respectively.
Lastly, the position in Amgen, Inc. (NASDAQ:AMGN) accounted for 5.86% of the fund’s portfolio, containing 80,600 shares worth $12.8 million. The company recently got an FDA approval to a heart disease drug – Corlanor to be marketed in the US. However, analysts are skeptical of the prospects of the drug, due to a more competing heart disease drug – LCZ696 from Novartis. On the other hand, Dan Loeb’s Third Point made an aggressive investment in Amgen, Inc. (NASDAQ:AMGN) during the fourth quarter of 2014, increasing its exposure by 700% to 10.6 million shares, valued at $1.7 billion. Orbimed Advisors, Orbis Investment Management and Legg Mason Capital Management are other major shareholders of Amgen, Inc. (NASDAQ:AMGN).
Disclosure: None
