- Baker Brothers’ 13F portfolio increased from $11.44B to $12.33B. The number of positions increased from 120 to 121.
- BeiGene Ltd. Stake was increased while reducing Achaogen.
- The top-three positions are Incyte Corporation, Seattle Genetics, and Alexion Pharmaceuticals and they add up to almost ~62% of the portfolio.
This article is first in a series that provides an ongoing
analysis of the changes made to Baker Brothers’ 13F portfolio on a quarterly
basis. It is based on Baker Brothers’ regulatory 13F Form filed on 11/14/2017.
Baker Brothers was founded by Julian & Felix Baker in
2000. Despite a less than ~50% win-record, the firm has managed to post
outstanding returns thru prudent position sizing. Over the years, the firm had
a number of home runs as the invested firms got acquired at huge premiums.
Recent M&A winners include Pharmacyclics (acquired by AbbVie), Synageva
(acquired by Alexion), and Salix (acquired by Valeant).
Assets Under Management (AUM) is at around $12.5B. They
invest in over a 100 companies although only around 20 are sized above 0.5% of
the portfolio. As a percentage of AUM, allocation to the highest conviction
picks can be very high at over 30%.
This quarter, Baker Brothers’ 13F portfolio increased ~8%
from $11.44B to $12.33B. The number of holdings increased from 120 to 121. The
top three holdings are at ~62% while the top five holdings are close to ~75% of
the 13F assets: Incyte Corporation (INCY), Seattle Genetics (SGEN), Alexion
Pharmaceuticals (ALXN), Acadia Pharmaceuticals (ACAD), and BioMarin
Pharmaceuticals (BMRN).
Notes: a) Regulatory Filings on 1/22/2018 indicate Baker
Brothers owning 22.4% of BeiGene Ltd (BGNE). Around 2M ADS shares were
purchased following a secondary offering at $101 per share bringing the total
ADS shares held to ~5.81M. The ownership stake also includes ~75.8M ordinary
shares also held (equivalent to 5.83M ADS shares, 1 ADS share = 13 ordinary
shares). Including those, the position sizing is close to 10% of the portfolio,
and b) Regulatory Filings after the quarter ended show them owning 4.9M shares
(27.3% of business) of Erytech Pharma S/A (ERYP). The position was acquired at
a cost-basis of ~$24.50: around 3M shares in the public offering at $23.26 and
the rest for $47.5M before. For investors attempting to follow Baker Brothers,
these two stocks are good to consider for further research.
The spreadsheet below highlights changes to Baker Brothers’
13F holdings in Q3 2017:
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following the best hedge fund picks, check out our book Profiting from Hedge Funds: Winning Strategies for the Little
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