Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), Baxter International Inc (NYSE:BAX), and Valeant Pharmaceuticals Intl Inc (NYSE:VRX) are among the top healthcare stock picks of Barclays PLC (ADR) (NYSE:BCS) in its Americas Top Picks List released yesterday. We decided to look at these stock investments and the respective hedge fund sentiment on each of them to see whether the smart money agrees with Barclays’ assessment, potentially making these very compelling picks as we prepare to head into the second half of 2015.
At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of six basis points, though these stocks underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 145% and beating the market by more than 85 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise rather than large-cap stocks.
What makes Alexion Pharmaceuticals an interesting stock is the fact it has replaced Gilead Sciences, Inc. (NASDAQ:GILD) to become the top stock in Barclays PLC (ADR) (NYSE:BCS)’s list. The analyst firm expects further upside from the current stock price of Alexion because of its steadily growing product Soliris, which is used in the treatment of atypical hemolytic uremic syndrome (aHUS) and paroxysmal nocturnal hemoglobinuria (PNH), and other pipeline medications including Strensiq and Kanuma. Both Strensiq and Kanuma have received a positive opinion from the Committee for Medicinal Products for Human Use (CHMP), which is a part of the European Medicines Agency (EMA). Strensiq is used for the treatment of bone manifestations originating from pediatric-onset hypophosphatasia (HPP), and Kanuma is used against lysosomal acid lipase deficiency (LAL-d). Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) completed the acquisition of Synageva BioPharma Corp. (NASDAQ:GEVA) earlier last week, with Synageva set to work as a directly-owned subsidiary of Alexion Pharmaceuticals. It seems as if the hedge fund managers tracked at Insider Monkey were following the stock of Alexion Pharmaceuticals very closely and liked what they saw, as the company had received net investments of $1.32 billion from 48 hedge fund managers on March 31 against net investments of $1.10 billion from 44 hedge fund investors three months earlier. Ken Griffin’s Citadel Investment Group holds the largest position in Alexion among hedge funds tracked at Insider Monkey with a current position of 1.14 million shares valued at $197.88 million.
Barclays PLC (ADR) (NYSE:BCS) has also put its weight behind Valeant Pharmaceuticals Intl Inc (NYSE:VRX) by including it in the top healthcare stock picks in America. Valeant is known for its aggressive, acquisition-driven growth strategy that targets matured products. Salix Pharmaceuticals and Bausch & Lomb are among its recent acquired companies. However, Barclays is expecting organic growth in Valeant Pharmaceuticals Intl Inc (NYSE:VRX) as well, with several promising drugs in its pipeline. It is important to note that the shares of Valeant Pharmaceuticals have grown 55.65% in 2015. Valeant’s share price growth in 2015 has allowed activist investors like Jeffrey Ubben of ValueAct Capital to reap profits out of the stock. The investment manager filed a 13D with the SEC revealing a sale of 4.39 million shares of Valeant since its most recent 13F filing on March 31, 2015. Valeant Pharmaceuticals Intl Inc (NYSE:VRX) was the ninth-most popular stock among hedge fund managers in our database, pulling in aggregate investments of $20.11 billion from 104 investment managers. Bill Ackman of Pershing Square was the largest shareholder of the pharmaceutical company among them, with his position containing 19.47 million shares with a robust market value of $3.87 billion.
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Baxter International Inc (NYSE:BAX) is another top healthcare stock pick of Barclays PLC (ADR) (NYSE:BCS), which could be quite surprising given the 4.58% decline in the share price of the healthcare company this year. However, Barclays has provided proper reasons for keeping Baxter in its list, starting with the fact that its new products are under-appreciated given their potential margin opportunity. The analyst has also considered the approved split-up of Baxter International Inc (NYSE:BAX) into separate medical product and biopharmaceutical companies. The split will complete on July 1, 2015 with two separate independent companies emerging at that time: Baxter International, trading on the NYSE with its regular ticker “BAX”, and Baxalta, trading under the “BXTL” ticker on the NYSE. Barclays has issued a price target of $80.00 on Baxter, indicating an upside of 14% from its current share price. Smart money has been bullish sentiment on Baxter International Inc (NYSE:BAX) recently, with 50 hedge fund managers in our database holding positions in the healthcare company with aggregate investments of $1.47 billion as of March 31, compared to just 35 funds with $782.39 million in holdings at the end of 2014. Richard S. Pzena is among the largest stockholders of Baxter International, with ownership of 5.03 million shares valued at $344.45 million.
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