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10 Biotech Stocks Hedge Funds Are Talking About

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·9 min read
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In this article, we present the list of the 10 biotech stocks hedge funds are talking about. You can skip our comprehensive analysis of the biotech industry, and go directly to 5 Biotech Stocks Hedge Funds Are Talking About.

A broader exodus of investors from growth stocks, rising inflation and an expected hike in interest rates took a toll on the biotech sector, which is experiencing a correction after seeing euphoric highs after the pandemic. As of February 24, the SPDR S&P Biotech ETF was down about 45% over the last 12 months. However, several analysts believe that now might be the right time to invest in biotech companies that are working on long-term products.

Insider Monkey has reviewed several investor letters from hedge funds and well-known investors to identify the specific areas that the smart money is currently focusing on. For letters from hedge funds and prominent investors, please see our hedge fund investor letters 2021 Q4 page.

Some notable biotech stocks that are famous among elite hedge funds include Biogen Inc (NASDAQ: BIIB), Novavax, Inc. (NASDAQ: NVAX) and Amgen, Inc. (NASDAQ: AMGN).

10 Biotech Stocks Hedge Funds Are Talking About
10 Biotech Stocks Hedge Funds Are Talking About

Photo by CDC on Unsplash

10 Biotech Stocks Hedge Funds Are Talking About

10. Medtronic plc (NYSE:MDT)

Number of Hedge Fund Holders: 55

Polen Capital, an investment management firm, published its “Polen International Growth” fourth quarter 2021 investor letter – a copy of which can be downloaded here. A return of 6.59% was delivered by the fund for the third quarter of 2021, outperforming the MSCI All Country World ex-USA Index (the “Index”) by 4.65% in the quarter. For the year, the Portfolio returned 7.10% versus the Index return of 7.82%. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.

Polen International Growth, in its Q4 2021 investor letter, mentioned Medtronic plc (NYSE: MDT) and discussed its stance on the firm. Medtronic plc (NYSE: MDT) is a Dublin, Ireland-based medical device company with a $143.1 billion market capitalization. Medtronic plc (NYSE: MDT) delivered a 3.08% return since the beginning of the year, while its 12-month returns are down by 8.60%. Medtronic plc (NYSE: MDT) closed at $106.64 per share on March 7, 2022.

Here is what Polen International Growth has to say about Medtronic plc in its Q4 2021 investor letter:

“The top absolute detractors during the quarter (includes) Medtronic plc (NYSE: MDT). Shares of Medtronic underperformed during the quarter on what we see as short-term setbacks in its Renal Denervation technology and HUGO robotic surgery platform. Both are pipeline prospects that could be sources of revenue growth if Medtronic can successfully commercialize them. However, they are not generating meaningful sales today. Looking ahead, we believe Medtronic’s management is handling this world-leading tech business well and that its growth prospects remain compelling.”

9. Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX)

Number of Hedge Fund Holders: 61

Harding Loevner, an investment management firm, published its “Global Equity Fund” fourth quarter 2021 investor letter – a copy of which can be downloaded here. A net return of 4.35% was recorded by the fund for the fourth quarter of 2021, trailing its Benchmarks, the MSCI All Country World Index, and the MSCI World Index which returned 6.77% and 7.86% respectively for the same period. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.

Harding Loevner Global Equity Fund, in its Q4 2021 investor letter, mentioned Vertex Pharmaceuticals Incorporated (NASDAQ: VRTX) and discussed its stance on the firm. Vertex Pharmaceuticals Incorporated (NASDAQ: VRTX) is a Boston, Massachusetts-based biopharmaceutical company with a $59.9 billion market capitalization. Vertex Pharmaceuticals Incorporated (NASDAQ: VRTX) delivered a 7.26% return since the beginning of the year, while its 12-month returns are up by 10.28%. Vertex Pharmaceuticals Incorporated (NASDAQ: VRTX) closed at $235.54 per share on March 7, 2022.

Here is what Harding Loevner Global Equity Fund has to say about Vertex Pharmaceuticals Incorporated in its Q4 2021 investor letter:

“In Health Care, the disappointing share price performance of Wuxi AppTec and Wuxi Biologics was partially offset by the strong rebound in Vertex Pharmaceuticals Incorporated (NASDAQ: VRTX)’s share price. Vertex reported encouraging Phase 2 results for its drug candidate to treat a rare form of kidney disease, as well as positive pilot data for the first patient treated with its groundbreaking stem cell therapy for Type 1 diabetes. These studies’ results were all the more encouraging as they validated the company’s strategy to deploy its unique drug development approach beyond its cystic fibrosis franchise.”

8. Zoetis Inc. (NYSE:ZTS)

Number of Hedge Fund Holders: 61

Polen Capital, an investment management firm, published its “Polen Global Growth” third quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly gross return of -3.03% was delivered by the fund for the third quarter of 2021, versus the MSCI AllCountry World Index (the “Index”)’s return of -1.06% for the same period. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

Polen Global Growth, in its Q3 2021 investor letter, mentioned Zoetis Inc. (NYSE: ZTS) and discussed its stance on the firm. Zoetis Inc. (NYSE:ZTS) is a Parsippany-Troy Hills, New Jersey-based drug company with an $88.7 billion market capitalization. Zoetis Inc. (NYSE:ZTS) delivered a -22.92% return since the beginning of the year, while its 12-month returns are up by 29.58%. Zoetis Inc. (NYSE:ZTS) closed at $188.09 per share on March 7, 2022.

Here is what Polen Global Growth has to say about Zoetis Inc. in its Q3 2021 investor letter:

“Finally, exiting our position in Zoetis was purely a function of valuation. With the business trading for up to 45x forward earnings, we felt we had more attractive alternatives. We maintain high conviction in the company and their competitive advantages and hope to be owners again, at a more attractive valuation. In short, we sold what we believe to be very a high-quality business at relatively high valuations to fund the purchase of equally high-quality businesses trading at lower valuations and even better long-term earnings growth prospects. While we are certainly not tactical in approach, we do aim to make prudent adjustments over time.”

7. Eli Lilly and Company (NYSE:LLY)

Number of Hedge Fund Holders: 61

Baron Funds, an asset management firm, published its “Baron Health Care Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. A return of 11.43% was delivered by the fund’s institutional shares for the Q2 of 2021, outperforming both its S&P 500 and Russell 3000 Health Care benchmarks that delivered 8.55% and 8.16% returns respectively for the same period. You can take a look at the fund’s top 5 holdings to have an idea about their top bets for 2021.

In the Q2 2021 investor letter of Baron Funds, the fund mentioned Eli Lilly and Company (NYSE:LLY) and discussed its stance on the firm. Eli Lilly and Company (NYSE: LLY) is an Indianapolis, Indiana-based pharmaceutical company with a $249.1 billion market capitalization. Eli Lilly and Company (NYSE: LLY) delivered a -5.28% return since the beginning of the year, while its 12-month returns are up by 26.38%. Eli Lilly and Company (NYSE: LLY) closed at $261.64 per share on March 7, 2022.

Here is what Baron Funds has to say about Eli Lilly and Company in its Q2 2021 investor letter:

“We started a position in Eli Lilly and Company, a large-cap pharmaceutical company. We think Lilly has a healthy base business with limited near-term patent expirations, a strong pipeline, and potential for significant margin expansion, which should translate to high single-digit revenue growth and mid-teens earnings growth over the next five years. Eli Lilly and Company (NYSE: LLY)’s pipeline includes donanemab, a potential blockbuster drug which the company is developing for Alzheimer’s disease and which recently received Breakthrough Therapy Designation by the FDA.”

6. Biogen Inc. (NASDAQ:BIIB)

Number of Hedge Fund Holders: 63

Longleaf Partners Fund, a Memphis-based fund under Southeastern Asset Management, published its “Longleaf Partners Fund” fourth quarter 2021 investor letter – a copy of which can be downloaded here. Longleaf Partners Fund was up 6.18% in the fourth quarter, taking returns for the full year to 23.58%, well ahead of its absolute return goal. However, the S&P 500 rallied 11.03% in the fourth quarter, taking the index’s full-year returns to 28.71%. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.

Longleaf Partners Fund, in its Q4 2021 investor letter, mentioned Biogen Inc. (NASDAQ: BIIB) and discussed its stance on the firm. Biogen Inc. (NASDAQ: BIIB) is a Cambridge, Massachusetts-based biotechnology company with a $30.2 billion market capitalization. Biogen Inc. (NASDAQ:BIIB) delivered a -14.23% return since the beginning of the year, while its 12-month returns are down by 23.79%. The stock closed at $205.78 per share on March 7, 2022.

Like Novavax, Inc. (NASDAQ: NVAX) and Amgen, Inc. (NASDAQ: AMGN), Biogen Inc. (NASDAQ: BIIB) is a notable biotech stock to watch in 2022.

Here is what Longleaf Partners Fund has to say about Biogen Inc. in its Q4 2021 investor letter:

Biogen (83%, 2.43%; 5%, 0.10%), a biotechnology company specializing in therapies for the treatment of neurological diseases, was a strong contributor before we exited the position in the first half. We began acquiring shares in January 2021, paying between 9- 11x FCF and a discount to our appraisal, even if the company’s promising drug pipeline turned out to be worth 0. After Biogen Inc. (NASDAQ:BIIB)’s Alzheimer drug Aduhelm was approved in June, we quickly sold out after the stock’s price appreciated over 70% and briefly exceeded our appraisal of the value. We re-initiated a position in Biogen Inc. (NASDAQ:BIIB) in December at a price below our original cost basis from January. The stock became very cheap once again after Aduhelm’s early sales disappointed due to its high initial cost before management correctly cut the price. We think Biogen’s core Multiple sclerosis (MS) and Biosimilars businesses are strong enough to create sustainable double-digit EPS growth, even if Aduhelm and the entire Alzheimer’s program is worth zero. We also expect a board led by large shareholders to continue the company’s accretive repurchase, while considering other beneficial corporate actions.

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Disclosure: None. 10 Biotech Stocks Hedge Funds Are Talking About originally published at Insider Monkey.