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This Hedge Fund Can Still Deliver Double Digit Returns: Here Are Its Top Picks

Sieni Kimalainen

Tamarack Capital Management was founded by Justin John Ferayorni, who remained the fund’s Chief Investment Officer and Portfolio Manager. Mr. Ferayorni holds A.B. degree in Chemistry from Princeton University, as well as Chartered Financial Analyst designation. Prior to founding Tamarack Capital Management, he worked as Healthcare Analyst and Portfolio Manager. He also held a position of Director of Research at Bricoleur Capital Management, LLC and at Robertson Stephens & Company’s investment banking division. Guided by the gained experience, Mr. Ferayorni decided to focus on investing in healthcare sector, excluding pre-commercial biotech-type companies. The fund employs long/short investment strategy, using integral bottom-up analyses for targeting the companies of interest.

The fund seems to have been employing the right strategy, since it has been returning positively during the several last years, with only one year down. As for 2014, the fund returned 18.8% and 2.2% in 2015. Then in 2016, it lost 9.1%, but coming back with a fantastic 29.9% in 2017. In 2018, the fund generated a return of 3.5%, and as for the first half of this year, the fund returned 6.77%. With annualized return of 13.7%, the fund seems to be performing quite steadily.

Justin John Ferayorni - Tamarack Capital Management

Insider Monkey’s mission is to identify promising (and also terrible) hedge fund stock pitches and share them with our subscribers. Our long strategy is based on the consensus picks of the 100 best performing hedge funds. This strategy was launched 5 years ago and generated a cumulative return of 115%. You can think of it as a mutual fund that returned 16.2% annually over the last 5 years, vs. 11.1% annual gain for the S&P 500 ETF (SPY). Basically we outperform the S&P 500 Index by 5 percentage points annually by identifying the top stock picks of the best hedge fund managers (see the details here).

Our short strategy is based on shorting hedge fund hotels that are likely to experience large hedge fund sales during market weaknesses. We launched this strategy in February 2017. It’s been almost 2.5 years and the stock picks of this strategy lost a cumulative 24.7% vs. a cumulative gain of 30.8% for the S&P 500 ETF. This is an absolutely mind blowing performance. The annualized return of our short picks is -11.2%, vs. 11.8% annualized gain for the S&P 500 Index during the same period. The annual alpha of this strategy is 23 percentage points. Jim Chanos doesn’t generate this kind of performance. The best thing about this short strategy is that it provides an excellent hedge during market meltdowns. For example, in Q4 of 2018 when the S&P 500 Index lost nearly 14%, this strategy’s picks lost 25% protecting our premium subscribers from large losses.

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Our newsletters are successful because we follow hedge fund managers like Justin John Ferayorni to identify the best and worst hedge fund stock picks. In this article we are going to take a look at Tamarack Capital Management’s top stock picks.

The fifth most valuable position in the fund’s portfolio for the second quarter of 2019 was Stericycle Inc (NASDAQ:SRCL). The fund lowered its stake in Stericycle Inc by 7% during this period, which brought it down from the third place. It seems that investors are becoming less interested in the company, since 16 hedge funds were bullish on the stock in Q2 2019, compared to 22 during Q1. Ariel Investments was the top investor during Q2 2019, holding a stake worth $155.5 million. Other hedge funds holding the company among the top positions in their portfolios were Iridian Asset Management, Generation Investment Management, and Diamond Hill Capital.

Pacira Pharmaceuticals Inc (NASDAQ:PCRX) was the fund’s fourth most valuable stock, a new addition from the previous quarter, boosted by 96% during Q2 2019. A total of 28 hedge funds were investing in the company, which is an increase of 1 shareholder compared to Q1 2019. The company’s top shareholder was Consonance Capital Management, holding a stake worth $121.8 million. The following were Millennium Management, Rock Springs Capital Management and D E Shaw.

The third most valuable stock in Tamarack Capital Management’s portfolio at the end of Q2 2019 was Bio Rd Laboratories Inc (NYSE:BIO). The fund boosted position for 54%, bringing it up from the sixth place. A total of 37 hedge funds were investing in the company at the end of Q2 2019, which is a decrease of 15% compared to the previous quarter. Millennium Management was the top investor during Q2 2019, holding a stake worth $164.4 million. Other hedge funds, holding the company among the top positions in their portfolios were Point72 Asset Management, Polar Capital, and Fisher Asset Management.

The fund’s second most valuable stock in Q2 2019 was Medtronic plc. (NYSE:MDT). The company remained on the second position in the fund’s portfolio from the previous quarter, despite being boosted by 20% during Q2 2019. A total of 49 hedge funds were bullish on the stock at this period, which is a slight decrease compared to the previous period, when 50 hedge funds were investing in the company. D E Shaw was its top investor, holding a stake worth $519.4 million. Other hedge funds with positions in the stock were AQR Capital Management, Diamond Hill Capital, Renaissance Technologies and GLG Partners.

Tamarack Capital Management’s top stock pick for the second quarter of 2019 was Allscripts Healthcare Solutions Inc (NASDAQ:MDRX), remaining at the position since the previous quarter. During this quarter, Mr. Ferayorni decided to boost the position by 11%. A total of 18 hedge funds were bullish on the company, which is a decrease of 14% compared to the previous quarter. Among them, Fisher Asset Management held the most valuable stock, worth $52.2 million. At the third place of Allscripts Healthcare Solutions Inc’s top shareholders was Tamarack Capital Management, which held 3,925,000 shares worth $45.7 million, comprising 13.9% of the fund’s portfolio. Among other hedge funds bullish on the sock were D E Shaw, Arrowstreet Capital, and GLG Partners.

Disclosure: None. This article is originally published at Insider Monkey.