Sarissa Capital Management was one of those rare activist hedge funds, which managed to beat the last year’s tough market environment, returning 15.5%. Just for the comparison, an average activist hedge fund reported a loss of 11% in the same period, and the S&P 500 lost 4.4%. Even over the last three years, the fund managed to outperform the market, delivering 13.8% annually, while the S&P 500 brought back 12%. Sarissa Capital Management continues to post positive gains in the current year, delivering 5% for the first two months of 2019.
According to most recent news, the fund is looking for ways to improve its business furthermore, which is why it has hired Eric Vincent, as the new president. Before joining Sarissa Capital Management, Eric Vincent was in charge of business development at Mubadala Capital, which is the investment unit of Abu Dhabi’s sovereign wealth fund, and he was also a president of Ospraie Management LLC. Currently, Sarissa Capital Management is managing around $700 million in assets, but it clearly looks for the ways to boost that amount, hiring new professionals that would not only bring their professional qualities and experiences to the fund's management but who would also improve the fund’s appearance, in the manner of it becoming more attractive for new investors.
Sarissa Capital Management was launched in 2012, by its current CIO, Dr. Alexander John Denner often referred to as Alex Ph.D. The fund, whose main focus is on the stocks from the healthcare industry, is based in Greenwich, Connecticut. Prior to founding Sarissa Capital Management, Alex Denner was a portfolio manager at Viking Global, and more importantly a Senior Managing Director at Icahn Capital LP, where he picked all the tricks of the (activist) trade. There is where he developed an activist strategy in healthcare, and he was the one responsible for many great investment moves. Alex Denner earned his S.B. degree from the Massachusetts Institute of Technology and M.S., M.Phil and Ph.D. degrees from Yale University.
The fund’s largest position (according to its 13F Q4 2018 portfolio) was Biogen Inc. (NASDAQ:BIIB), which recently reported that it would abandon its two main Alzheimer drug trials, which resulted in the company losing more than $18 billion of its market value. Biogen’s current market cap is $47.55 billion, and it is trading at a price-to-earnings ratio of 11.20. Year-to-date, the company’s share price lost 20.66%, and on April 5th, it had a closing price of $241.72. Recently, Cantor Fitzgerald restated its ‘Hold’ rating on Biogen’s stock with a price target of $250.00, while Royal Bank of Canada lowered its price target on it to $236, with ‘Sector Perform’ rating. In its last financial report, for the full year 2018, Biogen reported total revenue of $13.45 billion, compared to $12.27 billion in 2017, and diluted GAAP earnings per share of $21.58 versus $11.92 in 2017 (an increase of 81%).
When it comes to Sarissa Capital Management’s best investment moves, there were many, such as ARIAD Pharmaceuticals which was bought by Takeda Pharmaceutical Co for $62 billion, and Biogen’s spin-off, Bioverativ, that was sold to Sanofi SA for $11.6 billion.
Insider Monkey’s mission is to identify promising (and also terrible) hedge fund stock pitches and share them with our subscribers. We launched a long activist investing strategy in our monthly newsletter 2 years ago. This strategy’s stock picks returned 61% in 2 short years, vs. a gain of 21% for the S&P 500 Index ETF (SPY). Last October we shared one of our stock picks, Ascendis Pharmaceuticals (ASND), in a free sample issue of our monthly newsletter (you can still download it free of charge). The stock doubled in less than 5 months.
We have also been very successful at identifying stocks that will decline even in a bull market. We launched our short strategy a little more than 2 years ago and share our short stock picks in our quarterly newsletter. This strategy’s picks lost 27.5% since then, vs. a gain of 25% for the S&P 500 Index. This means our short strategy actually outperformed the market by 52.5 percentage points (let us know if you don’t understand how the outperformance for a short strategy is calculated).
Three weeks ago our monthly newsletter identified another undervalued stock that is expected to increase its earnings by more than 10% annually and trades at only 10 times its 2019 earnings. We expect this stock to return 60% in the next 12-24 months (it already returned 9% in 3 weeks). Email us if you are interested in this stock or subscribe here. We take a closer look at hedge funds like Sarissa Capital Management in order to identify their best and worst ideas.
This article was originally published at Insider Monkey.