The healthcare sector seems to be getting a lot of play in the investing press lately. Between all the talk on how to play the reform effort and the sector’s non-cyclical nature in an economy that’s struggling to gain momentum, it’s no wonder the sector is getting attention. Fortune magazine’s latest issue has an article by Mina Kimes entitled “Returning to Health” where the author goes hunting for bargains in a “beat down sector”.
We thought it would be interesting to look at what hedge funds are doing in healthcare and more importantly which hedge fund “healthcare screen” makes the most sense for us to follow? That last part about knowing which screen to follow is critical and that is exactly what AlphaClone empowers investors to do.
Once signed in as a full member, it took me all of two clicks to find AlphaClone’s Sector Picks: Healthcare fund group. That group combines all 177 hedge funds in the AlphaClone universe into one group and then “clone’s” the group’s collective intelligence around healthcare stocks. A few more clicks on AlphaClone's "clone generator" and we see the group’s Best 1 Ideas clone, which holds 36 unique securities in the current portfolio (for a description of this clone strategy look here), returns 8.2% annualized since 2000 compared to 0.5% annualized for the S&P500 Healthcare Index. The clone is also up 27.3% over the past year vs. 18.5% for the index (as of 2/1/2009).
Looking at the clone’s current clone portfolio it was easy to discern where hedge funds are placing their bets. The three most widely held stocks in this clone’s current portfolio are Baxter International [BAX], China-Biotics Inc [CHBT], and Human Genome Sciences [HGSI]; each with three funds reporting new stakes. The next most widely held healthcare stocks (each reporting two funds with new stakes) include Bard CR Inc [BCR], Immucor Inc [BLUD], Inverness Medical [IMA], Eli Lilly & Co [LLY], Mckesson Corp. [MCK], MDS Inc [MDZ], Onyx Pharmaceutical [ONYX] and finally Teva Pharmaceutical [TEVA]. The clone’s remaining 25 positions had one holder each amongst which Shire PLC [SHPGY] and Sirona Dental Systems [SIRO] garnered the largest allocation as a percent of the reporting manager's filing (each with a 0.6% allocation).
AlphaClone will rebalance all of its 3,100+ clone portfolio the evening of February 19th to reflect the latest hedge fund public disclosures. It’ll be interesting to see what new healthcare stocks hedge funds will be betting on then, stay tuned.
