Conan Laughlin’s North Tide Capital posted impressive first quarter returns of 10.1% from its 14 long positions in companies valued at $1 billion or greater. With 25 long positions at the end of 2014, there were a number of unaccounted for positions in our estimated returns, as North Tide invested in nearly a dozen companies with market caps of less than $1 billion. However as with many funds, the majority of its top picks were in larger cap companies, with eight of its top ten picks have at least $1 billion market caps.
Even then, many of North Tide’s top picks are notable to us given the fact that they are in small-cap stocks (which we classify as having market caps between $1 billion and $5 billion). It’s investors like North Tide which add great value to our small-cap strategy system, as they are heavily invested in the success of their small-cap picks and have poured considerable resources into identifying undervalued or under-the-radar companies to invest in. We have found that collectively, hedge funds’ top small-cap picks provide a great investment opportunity, with our strategy having returned over 137% since it was launched at the end of August, 2012 and beating the market by more than 80 percentage points (see the details).
Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) is one of the largest companies North Tide is invested in, as it held a 3.0 million share position valued at $172.53 million in the $70 billion pharmaceutical company. That position was North Tide’s second-largest, and accounted for 11.59% of its equity portfolio.Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) shares were up by 8.97% during the first quarter, which was good news for George Soros and a number of other billionaire investors who are crazy about Teva. All told, ten billionaires had positions in Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) at the start of 2015, with $799 million of their formidable wealth invested in it.
A position in Kindred Healthcare, Inc. (NYSE:KND) was North Tide’s fourth-largest, and was increased by 54% during the fourth quarter. That added investment paid off in a big way, as shares of Kindred Healthcare, Inc. (NYSE:KND) ballooned by 31.58% during the first quarter. The $2 billion market cap provider of healthcare living and rehabilitation facilities also helped billionaire Steve Cohen trump the market in the first quarter, though he had much less exposure to the stock than North Tide. Laughlin’s fund in fact had the highest exposure of any fund in our database, in addition to owning the largest position at 5.0 million shares valued at $90.90 million.
Boston Scientific Corporation (NYSE:BSX) was another big-time performer during the first quarter in which North Tide had a long position at the start of the year. Shares of Boston Scientific Corporation (NYSE:BSX)soared by 33.96% on the quarter, experiencing a particularly big jump on February 18 after a court settlement was reached in a case concerning it and Johnson & Johnson (NYSE:JNJ) which stretched back nearly a decade, to its 2006 acquisition of Guidant. Boston Scientific Corporation (NYSE:BSX) was accused of interfering with a deal that had already been reached between Guidant and Johnson & Johnson (NYSE:JNJ), with the latter seeking damages of as much as $7 billion as a result. The deal was finally settled for $600 million, which Boston Scientific Corporation (NYSE:BSX) will be able to pay primarily using balance sheet cash, allowing it to avoid compounding the settlement by not having to take on debt. North Tide had a 5.0 million share position in Boston Scientific at the end of 2014, valued at $66.25 million. Ric Dillon’s Diamond Hill Capital owned the largest position of any fund in our database, which consisted of 23.35 million shares, though it had less exposure to the stock than North Tide (which again, topped all funds we track).
Its long position of 1.50 million shares in Mylan Inc (NASDAQ:MYL), valued at $84.56 million, was North Tide’s fifth-largest at the start of 2015. The global pharmaceutical giant enjoyed a solid quarter, with returns of 5.29%, and has enjoyed an even better second quarter thus far. Shares are up by more than 10% in April after it made a $28.9 billion bid to buy Perrigo Company (NYSE:PRGO) on April 8.Mylan Inc (NASDAQ:MYL) itself is also a potential takeover target of the aforementioned Teva Pharmaceutical, which puts a lot of potential money balls in the air for Mylan Inc (NASDAQ:MYL) shareholders. Among those shareholders are billionaires John Paulson and Rob Citrone.
Weight Watchers International Inc. (NYSE:WTW) is all about helping clients lose weight, but it was the company’s own shares that shed weight in the first quarter; in fact they became downright anorexic. Weight Watchers International Inc. (NYSE:WTW) returned a horrendous -71.86% during the first quarter, falling to an all-time low of $6.99 from $24.84 at the start of the year. That was the worst performance by any $1 billion+ company during the quarter and dragged its market cap down to less than $450 million. 2014 saw a double-digit loss in subscribers to the company’s weight management system, which led to a severe 48.6% drop in operating income during the fourth quarter of 2014. That was bad news for billionaire Israel Englander, so seemingly felt the bottom had already been reached after a poor 2014; he increased his stake by over 3,000% during the fourth quarter to 1.89 million shares, the largest position in the stock of any fund in our database. North Tide’s 1.70 million share position valued at $42.23 million (now significantly less) came next.
Disclosure: None
