We recently compiled a list of the Top 10 Holdings of Caligan Partners. In this article, we are going to take a look at where Liquidia Corporation (NASDAQ:LQDA) stands against Caligan Partners’ other top holdings.
Founded in 2017, Caligan Partners is one of the most significant specialty hedge funds. David Johnson is the brainchild behind the hedge fund, which has its headquarters in New York, specializing in long-biased activist equity investment strategies. It sometimes invests in distressed debt and investments with high absolute return profiles.
Caligan Partners focuses on investment opportunities in the healthcare sector, primarily in the United States. At present, the industry dominates its holdings, accounting for 100% of its overall value of investments. The firm also invests in long and short positions targeting equity opportunities of public companies in the healthcare sector.
The bulk of the investments in the fund are in small-cap companies. These are stocks with a market capitalization exceeding $100 million, representing 8% of the total value of the investments. Conversely, investments in large-cap stocks are minimal, amounting to just about 0.1% of the total value. The average market capitalization of the companies in the fund’s portfolio is around $1.07 billion.
Its current portfolio value is $378 million, with a turnover rate of 18%. Nevertheless, one of the top 10 holdings of Caligan Partners accounts for more than 40% of the hedge fund’s portfolio. The performance of stocks bought by Caligan Partners within three months outperforms four times out of 14 transactions compared to the return of the S&P 500 within the same period.
In addition, Caligan Partners also engages in activist investments by pushing for strategic changes that have the potential to grow shareholder value. Management changes are part of the changes the hedge fund advocates in companies where it gets involved, as it often pushes for board seats to influence management decisions and companies’ directions.
Caligan Partners is one of the hedge funds that contributed to the strong performance of activist investments in 2023. As activist investors pushed corporations to change leadership and streamline their operations to enhance shareholder value, they generated an average return of 20.2%.
Caligan Partners and other activist investors have gained more power to secure board positions. The investors secured 134 positions on boards in 2023, marking a 30% rise from the year before and the highest number since 2018.
Activist investors also clinched 36 positions in the final round of voting at general meetings in 2023, a 125% rise from the year prior and a record high. They also secured positions in 80% of the campaigns, up from 33% in 2022. Additionally, the hedge fund also urges companies to consider strategic alternatives such as the divestment of some assets or fill sale for companies that have underperformed.
The fact that the top 10 holdings of Caligan partners come from the healthcare sector is not surprising. Healthcare is often considered a defensive sector that tends to outperform in choppy markets as the one experienced last year due to high interest rates. However, that was not the case, as the overall sector underperformed the S&P 500, which was up by 24% by year-end.
The S&P 500 Healthcare Index was down by about 0.4% in 2023. Healthcare company shares fell significantly as the benefits from the pandemic and the rollout of vaccines dropped. Although companies that produce medical devices might have faced a more challenging outlook, those that develop weight loss drugs have performed much more positively. The US Federal Reserve’s strategy of raising interest rates and keeping them high for long has been putting pressure on the healthcare industry.
The outlook also does not look suitable for the sector, given that healthcare stocks are pressured during election years as presidential hopefuls pledge reforms targeting drug prices and health insurance. Nevertheless, there is a possibility that Caligan Partners is one of the hedge funds that will benefit investors, taking note of depressed valuations in the healthcare sector. The sentiment among investors and experts in the healthcare field is unexpectedly optimistic. Although many anticipate moderate expansion and certain areas are in a stronger position than the rest, there’s a widespread feeling that the industry is set for a recovery.
Methodology
Caligan Partners is one of the top specialty hedge funds specializing in healthcare stocks, often considered defensive plays when the economy faces uncertainties. In this article, we discuss the top 10 holdings of Caligan Partners and why they stand out for gaining exposure in the healthcare stocks. We referred to the original 13F filing by Caligan Partners on the SEC’s website to determine the hedge fund’s stake in each stock. The stocks are ranked based on the hedge fund’s equity value.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An aerial view of a biopharmaceutical manufacturing plant, signifying the company’s expansive operations.
Liquidia Corporation (NASDAQ:LQDA)
Caligan Partners’ Equity Stake: $152.83 Million
Number of Hedge Fund Holders: 23
Liquidia Corporation (NASDAQ:LQDA) is Caligan Partners’ biggest holding, accounting for 41.61% of its total portfolio. The biopharmaceutical company develops, manufactures, and commercializes various products for unmet patient needs. Its lead product is YUTREPIA, an inhaled dry powder used to treat pulmonary arterial hypertension.
After rallying by more than 80% in 2023, Liquidia Corporation (NASDAQ:LQDA) has been under pressure for the better part of 2024 and is flat for the year. The underperformance has everything to do with the company’s disappointing Q1 2024 results, with revenues dropping 33% to $3 million. The company also posted a net loss of $40.9 million compared to $11.7 million delivered in the same quarter last year.
As of the end of the first quarter, 23 hedge funds tracked by the Insider Monkey database held stakes in Liquidia Corporation (NASDAQ:LQDA), up from 22 as of the end of the fourth quarter of 2023.
Overall LQDA ranks 1st on our list of Caligan Partners’ top holdings. You can visit Top 10 Holdings of Caligan Partners to see the other stocks that are on hedge funds’ radar. While we acknowledge the potential of LQDA as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than LQDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
