The basket of biotech stocks has been a good bet over the past five years, showing exponential growth hard to ignore. That group of stocks has done better than the S&P 500 for 66% of the quarters since 2001, based on 73 basis points.
So who are the hedge funds backing today? The following is the list of biotech companies most favored by hedge funds.
Pharmacyclics Inc. (PCYC): Over the past year this stock has doubled in price, ranging over the past 52 weeks from $82.51 to $260.47, with a consensus target price of $246.
Gilead Sciences Inc. (GILD): With a market cap of $164 billion, this biotech company was recently trading at $111 with a 52 week range of $78.50 to $116.83, with a consensus price of a little bit beyond $121.
The following three companies are short-selling positions.
Regeneron Pharmaceuticals Inc. (REGN): Trading now at $516, this stock as a 52 week range of $269.50 to $518.20. Its market cap is $52 billion, and the consensus target is about $503.
Amgen Inc. (AMGN): This stock sells today for $164, with a 52 week range from $113.01 to $173.60. With a market cap of $124, analysts have chosen a consensus target price of approximately $182.
Celgene Corp. (CELG): This biotech company was growing crazily from early 2012, but many believe Celgene reached the top of the mountain in early 2015. It has a market cap of $92 billion, and a 52 week range of $74.00 to $129.06. Consensus target price of $137, or a bit more.
According to Friday’s mandatory regulatory 13F filings, top US hedge fund firms are reducing, or seriously divesting of their stakes in the wildly successful consumer electronics firm Apple Inc.
Philippe Laffont’s Coatue Management sold off 1.2 million shares over the past quarter, but Apple is still the fund’s single largest US holding, with 7.7 million shares still in its possession. Omega Advisors, run by Leon Cooperman, unloaded 383,790 shares of Apple during the first three months of the year. Rothschild Asset Management reduced its stake in Apple by 107,953, leaving 938,683 shares still invested. Another big Apple holder, David Einhorn’s Greenlight Capital sold off 1.2 million shares. They are still holders of 7.4 million shares, for now.
Apple has been a favorite stock for hedge funds, especially last year. Apple returned the favor by rising 38 percent points in 2014. According to analysts who looked at 850 funds with $2 trillion in AUM, 12 percent of the hedge funds included Apple among their top 10 holdings. The analysts point out that, due to its size as the largest publicly traded company in the US- that made it important for “both hedge fund and index performance.”
Not all hedge funds are on the same page, it should be noted. Carl Icahn left his 52.8 million stake in Apple untouched, while Ray Dalios’ Bridgewater Associates added 473,500 shares for a total of 732,997.
It is no secret that 2014 was one of the worst years in history for hedge fund returns. And don’t think the managers of these funds haven’t had to take some of the responsibility, in the form of lower wages.
As a group the 25 top-earning hedge fund managers collected what most of us would consider a (more than) respectable $11.6 billion in income, despite the poor showing of the funds they were managing. Sounds like a lot of money, right? And it is. But the managers, as a group, experienced their collective $11.6 billion take home pay as a pay-cut by half, compared to what they made in 2013.
Not to beat a dead (but rich) horse into the ground, but hedge fund managers believe that their earnings for 2014 were actually “paltry.” This is how they feel, and we know feelings are always valid. However, when those of us still living in the real world look at $11.6 billion, we see an amount of money which is larger than the GDP of Nicaragua, Laos or Madagascar. Not bad for 25 guys. (No woman has yet found her place on this list of 25 top-earners in the 14 years since the list’s inception.)
“How bad was ?,” Alpha magazine asked. “The 25 hedge fund managers on our 14th annual Rich List made a paltry $11.62bn combined, barely half of the $21.15bn the top 25 gained the previous year and roughly equal to what they took home during nightmarish 2008.Harsh memories of the global financial crisis pervaded Wall Street in 2014 – at least, for the highest-earning hedge fund managers.”
Sorry for the harsh memories. I wonder if Kenneth Griffin of Citadel, Renaissance Technologie’s James Simons, or Ray Dalio of Bridgewater Associates’ can sleep at night wondering if they can feed and house their families on a mere $1 billion take-home in 2014, which is what each of the top three earners made.
We suggest that these “Rich-List” dwellers save some of their pay from one year to the next in case another terrible year should haunt them once again.
(In case you were wondering, a person, or family, would have to spend $2.7 million every single day of an entire year to spend 1 billion dollars. That’s a heck of a lot of Cheerios.)
The month of April finished poorly for Winton Capital Management, a hedge fund that used computer algorithms to buy and sell. The $30.9 billion investment company had its largest monthly loss in seven years at its biggest hedge fund.
Winton Futures Fund, valued at $12.4 billion, lost 4 percent in April, slashing its yearly gain for 2015 so far down to 0.5 percent.
“There were some surprises in store for the last two days of the month, with a decent selloff in stocks, bonds and the dollar together with a rally in crude oil,” Matthew Beddall, Winton’s chief investment officer.
The sources of the downturn were mostly currencies and energy stocks. The dollar, which had been rising, fell in April, while the price of oil, which had been falling, and its best single month since May 2009.
April’s loss was only surpassed by its 4.6 percent loss in July 2008, making this the largest decline in almost 7 years.
According to data from the hedge fund tracking service HFR, and the London-based research firm , exchange-traded funds will soon overtake hedge funds in terms of total amount invested. The numbers show that within only a few months the 25 year-old ETF/ETP industry will overtake in popularity the 70 year-old hedge fund industry.
The fact that the ETF industry has been outpacing the hedge fund industry in its growth is surprising to many observers who note that the hedge fund industry has also been growing quickly, just not as quickly as ETFs. At the end of 2013 there was $230 billion more invested in hedge funds than in ETFs, compared to only $13 billion more in hedge funds at the end of the first quarter of 2015.
One explanation for this trend is the disappointment many investors have had in hedge fund returns, which often lag behind the returns realized by the S&P 500.
“With the positive performance of equity markets, many investors have been happy with index returns and fees,” the report said. This situation has had a positive effect on exchange traded products.
When it comes to investing in hedge funds, the trending money says “small is the new big.” Over the past five years, at least, more money each year (except for the notable exceptions of 2009 and 2012) is flowing into hedge funds with AUMs under $5 billion. In 2014 the amount of new money invested in these alternative funds was virtually the same for large funds and small funds.
Of approximately $76.4 billion invested in hedge funds in 2014, close to half went to managers with under $5 billion under their watch. In 2013 the smaller funds received about 37 percent of money flowing into hedge funds, severely reversing 2012’s activity in which $93 billion was invested in the larger funds while $63 billion was withdrawn from small and mid-size managers.
One contributing factor to this trend is pension funds and endowments. These pools of money are beginning to point away from the larger funds run by financial-world celebrities since the smaller funds offer lower fees and better performance.
Chief investment officer for the University of California, Jagdeep Singh Bachher, who manages about $91 billion, said,
“I’d rather invest in funds that are small or midsize where managers are highly motivated and more aligned with us.”
No need to feel bad for the larger funds, yet. Giant managers like Och-Ziff Capital Management Group, LLC are still growing. When the economy bottoms out, like the crisis of 2009 and 2012, clients tend to take their money out of the smaller funds.
Not all measures of fund success conclude that smaller funds are better investments, either. According to HFR Inc, funds which manage over $5 billion have returned on average 9 percent since 2007. Smaller funds only returned about 6 percent.
In a different examination of the issue, however, 2,287 hedge funds that specialize in picking stocks, investment consultant firm Beachhead Capital Management saw that really small funds with assets between $50 million and $500 billion had returns which averaged 2.2 percentage points more over ten years than bigger funds.
“There have been a number of recent studies that have demonstrated consistent out-performance of smaller funds compared with large hedge funds,”
said Mark Anson, head of billionaire Robert Bass’s family investment firm. Mr. Anson has over half of the Bass hedge fund assets in companies with under $1 billion in AUM.
A protest union group called “Hedge Clippers” disrupted a well-attended hedge fund conference held in midtown Manhattan on Monday. The group was demanding from certain investors that they help them to create “fair wages” for workers in restaurant chains such as McDonald’s and Darden Restaurants.
The protestors shouted slogans such as, “Bill Ackman, show me $15,” referring to the wage they would like to see for workers, and the billionaire who runs Pershing Square Capital.
They also chanted, “Hedge fun billionaires, pay your fair share,” meaning that the fund managers should pay the 15 percent capital gains tax levied on long-term investments.
The shouting interrupted a session of the 2015 Active-Passive Investor Summit which featured Joele Frank, the head of a crisis public relations firm that defends companies from activist investors. The summit itself was hosted by the research firm 13D Monitor. The 20 minute protest was cut short when the group dispersed in response to threats of police intervention.
Charles Kahn, spokesman for the group, said that theyare targeting Ackman, Jeff Smith of Starboard Group and Nelson Peltz of the Trian hedge fund due to their current and past investments in Darden, Burger King, Wendy’s and McDonald’s.
“So many people are making money, literally, on the misery of workers,” Khan told USA TODAY.
Hedge Fund Research, a firm that tracks the ups and downs of the hedge fund industry, reported that hedge funds rose by 2.4 percent on average during the first quarter of 2015. That figure surpasses the stagnant S&P 500 which rose by 0.4 percent during the same period.
This news comes as a positive reflection on the hedge fund industry after a long stretch of bad news and slow to no growth. The HFRI Fund Weighted Composite Index rose by 0.5 percent in March, helping the index grow by a total of 1.4 percent for the quarter.
Hedge funds have been getting bad press in recent months. They have been criticized for charging high management fees with little to show by way of returns on investment. Last year was especially harsh with an average gain of only 3.3 percent compared to the S&P 500’s gain of a solid 12 percent.
Lead manager John Tilney will be retiring from his position at Armajaro Asset Management LLP, a hedge fund based in London. The fund became known as the “Chocfinger” hedge fund due to its former purchasing of 7 percent of the world’s cocoa supply
Tilney, who is 60 years old, joined Armajaro in 2004. A former verteran commodity trader at Glencore, he came to Armajaro to establish the flagship Armajaro Commodities Fund. He plans on leaving his post and becoming an advisor this April. Oliver Denny, a co-manager at the fund, will take Tilney’s place.
Mr. Denny remarked: The next phase of the commodity cycle will be very interesting, and I believe it will provide some excellent investment opportunities for ACF.”
Founded in 1998 by Anthony Ward, the British press gave the fund the nickname “Chocfinger” in 2010 after it bought about 240,000 metric tons of cocoa from London’s NYSE Liffe exchange. At the time it was about 7 percent of the entire world supply.
The move comes after a time of loss. During the 15 months preceding the closing of 2013, the most recent year for which there are accounts available, the group holding company recorded a loss of $103.4 million after taxes. The accounts show that the shortfall was “predominately due to losses within the Armajaro Trading Limited subsidiary.” During that time frame the highest paid employee at Armajaro received $19.6 million in compensation.
Andy Redleaf, CEO of Whitebox Advisors, sent an internal memo last Sunday expressing worry that he sees signs of another crash on the offing, similar to that of 2007.
The memo, which was obtained by CNBC.com, quotes Redleaf as saying: “I think it is a truly scary time.” Whitebox manages $4.2 billion in assets.
Specifically, Redleaf is fearful that the stimulus to place new money in markets resembles too closely the lower credit standards that were in effect in the housing market right before that sector crashed and burned in 2007.
“We do not know exactly where all the credit creation of this cycle has gone. Certainly money sits idly as excess reserves, but just as certainly money that would not exist but for unconventional monetary policy has distorted prices and resource allocation,” Redleaf wrote.
Redleaf mentioned the oil market, which reached a high of around $100 a barrel before the price slid into the abyss of $43 per barrel today. He stated that the high price could have been caused by China “buying on easy credit” as well as other floods of money going oil producers who turned that money around into abundant supply, thus drastically lowering the price.
He noted additionally that the stock market might also be inflated in a similar way by sovereign wealth funds and the Swiss central bank’s ownership of large amounts of equities.
“There are some parallels with the collapse in home prices which preceded the financial crisis,” he explained.
Nine years ago Redleaf predicted the coming financial crisis, so it may be worthwhile to pay attention to his fears. In a letter he wrote to investors in December 2006 Redleaf stated:
“Sometime in the next 12 to 18 months, there is going to be a panic in credit markets. The driver in the credit market panic of 2007 or 2008 will be a sudden, profound and pervasive loss of faith in the alchemy of structured finance as currently practiced.”