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Gilead Sciences, Inc. (NASDAQ:GILD), Novo Nordisk A/S (NYSE:NVO), and Molina Healthcare, Inc. (NYSE:MOH) are three of the healthcare companies that Jim Simons’ quant fund has identified as having bright future prospects.
Jim Simons’ Renaissance Technologies is one of the biggest money managers in the world, with assets under management of more than $130 billion as of April 2021. The renowned quantitative fund is one of the most fascinating success stories in the history of finance, being founded and shaped by Simons and others with academic/mathematical backgrounds and zero stock trading experience.
Jim Simons’ stock portfolio is guided by advanced mathematic, or quantitative, models, which sift through massive amounts of data to pinpoint obscure correlations that can then be profited from. And boy, has the fund ever profited from them.
Renaissance’s flagship Medallion fund, which is named in honor of the math awards Simons has won, including the AMS Oswald Veblen Prize in Geometry in 1976, has been the most successful fund in history, returning an absurd 66% before fees on an annualized basis between 1988 and 2018 and generating more than $100 billion in trading profits. The fund also returned 76% in 2020 despite the dramatic market upheaval unleashed by the Covid-19 pandemic. The Medallion fund is currently closed to outside investors.
Jim Simons’ stock portfolio has traditionally had large exposure to the healthcare sector, suggesting the fund’s mathematical models are more bullish on the long-term prospects for healthcare stocks than for any other industry. At the end of September, the fund had 18.5% exposure to healthcare stocks in its $70.7 billion 13F portfolio, trailing tech stocks by just five basis points in terms of overall exposure. The fund doesn’t have more than 10% 13F exposure to any other sector.
In this article we’ll take a look at the ten healthcare stocks that Renaissance Technologies likes the most from an industry it’s been extremely bullish on for years.
Jim Simons of Renaissance Technologies
The following data about Jim Simons’ stock portfolio is gathered from Renaissance Technologies’ latest 13F filing with the SEC. We follow hedge funds like Renaissance Technologies because Insider Monkey’s research has uncovered that their consensus stock picks can deliver outstanding returns.
All hedge fund data is based on the exclusive group of 900+ funds tracked by Insider Monkey that filed 13Fs for the Q3 2022 reporting period.
Jim Simons Stock Portfolio: 10 Biggest Healthcare Stocks
10. Biogen Inc. (NASDAQ:BIIB)
Value of Renaissance Technologies’ 13F Position: $308 million
Number of Hedge Fund Shareholders: 72
Jim Simons’ quant fund has at least $480 million invested in each of Molina Healthcare, Inc. (NYSE:MOH), Gilead Sciences, Inc. (NASDAQ:GILD), and Novo Nordisk A/S (NYSE:NVO), which rank among his top healthcare picks. The Jim Simons stock portfolio also has a significant $308 million position in Biogen Inc. (NASDAQ:BIIB), though it did cut the size of its holding by 26% during Q3 to 1.15 million shares.
A lot is riding on the progress of Biogen Inc. (NASDAQ:BIIB)’s Alzheimer’s treatments, namely Lecanemab, which has showed the ability to slow the progression of the disease. That’s in contrast to Biogen’s other Alzheimer’s treatment Aduhelm, which was significantly hyped in 2021 for its ability to reduce amyloid beta plague, which is considered a contributor to Alzheimer’s. However, that treatment nonetheless failed to demonstrate any improvement or slowing of Alzheimer symptoms in patients. The Alzheimer’s market is projected to be worth as much as $25 billion by 2029.
ClearBridge Investments discussed the recent trial results of Biogen Inc. (NASDAQ:BIIB)’s Lecanemab in its Q3 2022 investor letter:
“Biogen Inc. (NASDAQ:BIIB) was the leading contributor among several biopharma names, boosted by positive, pivotal clinical data for its next-generation Alzheimer’s treatment Lecanemab. In a pivotal trial, the drug proved safe and efficacious in slowing progression of Alzheimer’s disease.”
9. AstraZeneca PLC (NASDAQ:AZN)
Value of Renaissance Technologies’ 13F Position: $318 million
Number of Hedge Fund Shareholders: 44
Jim Simons made just a minor tweak to his fund’s AstraZeneca PLC (NASDAQ:AZN) holding during Q3, trimming it by 2% to just under 5.8 million shares. AZN shares had a big Q4, gaining 24%, which lifted them to 16% gains for the year.
One of the 5 Biggest European Pharmaceutical Companies, AstraZeneca PLC (NASDAQ:AZN) has a much more stable revenue base than Biogen and an equally promising pipeline of treatments, with no less than 18 phase 3 trials expected to produce results in 2023, the bulk of which are in oncology. Those are in addition to the company’s promising breast cancer treatment Enhertu, which demonstrated a significant improvement in overall survival compared to chemotherapy in a phase 3 trial.
Carillon Tower noted that foreign currency headwinds, among other things, weighed on AstraZeneca PLC (NASDAQ:AZN) shares in Q3, as discussed in the fund’s Q3 2022 investor letter:
“AstraZeneca PLC (NASDAQ:AZN)’s relatively high exposure to international end markets and foreign currencies in the face of rising global macroeconomic concerns drove stock underperformance. Increasing industry focus on over-the-counter drug litigation, where the company has modest exposure, also may have weighed on shares.”
8. Incyte Corporation (NASDAQ:INCY)
Value of Renaissance Technologies’ 13F Position: $323 million
Number of Hedge Fund Shareholders: 39
Renaissance Technologies trimmed the size of its Incyte Corporation (NASDAQ:INCY) position by 6% during Q3, with Jim Simons’ stock portfolio ending the quarter with nearly 4.85 million shares. Several hedge funds added INCY to their 13F portfolios during Q3 following a moderate sell off of the stock during the prior two quarters. Paul Marshall and Ian Wace’s Marshall Wace LLP and Noam Gottesman’s GLG Partners built two of the largest new stakes in INCY during the third quarter.
Incyte Corporation (NASDAQ:INCY) is another biotech with a focus on oncology, including its treatment for bone marrow disorders, Jakafi, which comprise the bulk of the company’s sales right now. Back in 2019, the company predicted that Jakafi could hit $2.5 billion to $3 billion in sales by 2026 and those projections may end up being extremely modest.
In Q3, Jakafi pulled in $620 million in revenue, up 13% year-over-year, while Incyte Corporation (NASDAQ:INCY) as a whole had $713 million in sales. The company is guiding for as much as $2.4 billion in sales for Jakafi in its fiscal year 2022. The company also has some intriguing prospects in the dermatology space, including treatments for both atopic dermatitis and vitiligo.
7. Eli Lilly and Company (NYSE:LLY)
Value of Renaissance Technologies’ 13F Position: $328 million
Number of Hedge Fund Shareholders: 75
Jim Simons made a sizable investment in Eli Lilly and Company (NYSE:LLY) during Q3, raising the size of his stake in the company by more than 150% to over 1.01 million shares. Other hedge funds have also been buying up LLY in droves recently, as there’s been a 36% jump in the number of funds long LLY over the past two quarters.
Eli Lilly and Company (NYSE:LLY) also has a promising Alzheimer’s treatment in development called donanemab, which has shown greater efficacy than Biogen’s Aduhelm when it comes to clearing beta amyloid plague from the brain. However, it’s still early days for the trial and it will need to show improvement in slowing the progression of symptoms, which Aduhelm failed to demonstrate. That aside, Eli Lilly also has a robust pipeline of diabetes and other drugs, including future blockbuster Mounjaro.
The ClearBridge Global Growth Strategy added Eli Lilly and Company (NYSE:LLY) and its promising portfolio of diabetes drugs to its 13F portfolio in Q3, as the fund revealed in its Q3 2022 investor letter:
“In the U.S., we initiated a position in pharmaceutical maker Eli Lilly (NYSE:LLY) as it brings out new drug candidates for diabetes and Alzheimer’s disease. New drugs impact diabetes but have also demonstrated significant weight loss for patients who are overweight and have other co-morbidity issues as a result. Lilly is one of the two key players in diabetes care and we believe the potential market opportunity is much higher than the consensus forecasts as we are seeing evidence of accelerating adoption.”
6. Merck & Co., Inc. (NYSE:MRK)
Value of Renaissance Technologies’ 13F Position: $393 million
Number of Hedge Fund Shareholders: 82
Closing out the first half of the ten biggest healthcare stock picks in Jim Simons’ stock portfolio is Merck & Co., Inc. (NYSE:MRK). The billionaire money manager cut his fund’s MRK stake by 33% during Q3, leaving it with over 4.56 million shares. Merck has had remarkably steady hedge fund ownership in recent years, with between 72 and 89 funds long MRK every quarter since Q4 of 2015.
As one of the 5 Best Diabetes Stocks To Buy Now, Merck & Co., Inc. (NYSE:MRK) is competing head-to-head with Eli Lilly for supremacy in the huge diabetes market, which is forecast to top $54 billion in revenue by 2030. The company has a blockbuster treatment of its own in the form of type 2 diabetes drug Januvia, which pulled in $5.3 billion in sales in 2021. However, the company loses patent exclusivity on the treatment in January 2023, though there are currently no generic versions of it available. Merck has plenty of possibilities in its pipeline to replace any waning Januvia sales, as it has 112 programs in phase 2 or 3 clinical trials as of August 2, 2022.
Carillon Tower Advisers discussed the recent performance of its Merck & Co., Inc. (NYSE:MRK) investment in the fund’s Q2 2022 investor letter:
“Merck & Co., Inc. (NYSE:MRK) reported a strong first quarter and raised its financial guidance for 2022. The company also continues to benefit from the recent rotation into pharmaceuticals, which historically has been a more defensive industry.”
See where Novo Nordisk A/S (NYSE:NVO), Molina Healthcare, Inc. (NYSE:MOH), and Gilead Sciences, Inc. (NASDAQ:GILD) rank in Jim Simons’ stock portfolio by clicking the link below.
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Disclosure: None. Jim Simons Stock Portfolio: 10 Biggest Healthcare Stocks is originally published at Insider Monkey.