All 98 Baker Brothers Portfolio Stocks

Hold studying this text to be taught extra about Baker Brothers Advisors.

Desk Of Contents

Baker Brothers’ Philosophy and Technique

Brothers Julian and Felix Baker have earned their guru standing on Wall Road, having delivered an distinctive observe file of annualized returns over time. Julian has a enterprise background from Harvard, whereas Felix has a Ph.D. in Immunology from Stanford.

Collectively, they’ve mixed their particular person experience to generate superior returns by focusing solely on the biotech business. Property underneath administration grew from $250 million in 2003 to $23.2 billion as of November fifteenth, 2023.

The fund’s technique consists of using a fundamentally-driven approach of investing to give you its funding choices, often known as “bottom-up investing”. Not like top-down investing, which suggests learning the larger image of financial components to make funding choices, bottom-up investing entails trying on the company-specific fundamentals.

These elementary metrics embrace enterprise financials, money flows, and the advantage of its items and providers. That is essential when investing within the biotech business, as every firm is exclusive, requiring area of interest information to grasp its enterprise mannequin.

The fund’s philosophy stands in holding its investments ordinarily for 3 years, although its higher-conviction investments could be seen held for longer. Moreover, Baker Bros. don’t intend to dilute their standing as a extremely profitable biotech traders, as they don’t intend to ever allocate property in different industries. Nonetheless, some minor stakes within the industrial sector had been reported prior to now.

Lastly, the 2 brothers don’t imagine in diversifying the fund’s portfolio. As a substitute, they emphasize that specializing in particular firms, which they will analyze and perceive deeply and place concentrated positions of their securities, can generate superior returns over the long run.

Baker Brothers Investments’ Portfolio & 6 Largest Public-Fairness Investments

Upon Baker Bros’ portfolio, one can see that it holds 98 particular person shares, questioning the fund’s disbelief in diversification. Nevertheless, the fund’s investing philosophy does maintain up, as the highest 10 holdings account for round 92% of the full capital invested, confirming their inclination in the direction of high-conviction investments. Moreover, 100% of the fund’s holdings comprise firms working within the healthcare sector.

Supply: 13F submitting, Creator

Seagen Inc. (SGEN)

Seagen is a biotechnology firm that focuses on the event and commercialization of therapies for the remedy of most cancers. The corporate gives medicine for the remedy of sufferers with Hodgkin lymphoma, superior or metastatic urothelial most cancers, and unresectable or metastatic HER2-positive breast most cancers, amongst others.

Seagen’s revenues have been experiencing an uptrend, however the firm’s losses have additionally been widening.

Baker Bros owns round 23.8% of the corporate, the inventory occupies almost half of its complete public fairness holdings, and it’s the fund’s largest holding by far. The place was left unchanged in the course of the quarter.

BeiGene, Ltd. (BGNE):

BeiGene is an early commercial-stage biopharmaceutical agency engaged on creating and commercializing revolutionary molecularly-targeted and immune-oncology medicine for the remedy of most cancers. It’s the fund’s second-largest holding, occupying 13.5% of its complete portfolio.

That is fairly odd for the reason that firm is predicated in Beijing, China, which signifies that the fund’s due diligence course of has to go to the following stage as a result of weaker Chinese language reporting requirements.

Regardless of the uncertainty surrounding BeiGene, the corporate has developed into a totally built-in international biotechnology firm with operations in China, america, Europe, and Australia. The corporate has a strong pipeline of prescribed drugs, strengthening its status.

Nonetheless, BeiGene produces miniature revenues towards its $19.9 billion market cap, indicating that traders are betting closely on the corporate’s long-term prospects. The corporate holds vital money, which ought to hopefully be sufficient till the following drug commercialization earlier than additional diluting shareholders.

Baker Bros held its place regular final quarter, with the fund nonetheless proudly owning almost 11.4% of the corporate.

Incyte Company (INCY):

Incyte Company focuses on the invention, improvement, and commercialization of assorted therapeutics. Its flagship merchandise embrace JAKAFI, which is a drug for the remedy of myelofibrosis and polycythemia, and Iclusig, a kinase inhibitor to deal with power myeloid leukemia.

Not like many biotech firms, that are pre-revenue, Incyte has been rising its prime and backside line for years. Revenues have expanded from round $169 million in 2010 to $3.61 billion over the previous 4 quarters. The inventory is buying and selling at a ahead P/E ratio of ~12.6, which is a near-record low valuation a number of for the corporate.

EPS over the medium time period is predicted to develop by round 28% each year since Incyte is an business chief, having primarily monopolized its areas of remedy. In that regard, the valuation appears compressed. Nevertheless, the business is stuffed with dangers, and when the corporate’s patents expire, competitors is more likely to rise.

The fund owns round 16.1% of the corporate, with a market cap of $12.0 billion. The place was boosted by lower than 1% within the earlier quarter.

ACADIA Prescribed drugs Inc. (ACAD):

ACADIA Prescribed drugs focuses on the event and commercialization of small molecule medicine aimed toward unmet medical wants in central nervous system issues. The corporate options extraordinary income development, with its 5-year CAGR standing at 24.9%. The underside line has by no means been constructive, nonetheless, with losses persisting whilst gross sales are rising.

Again in March of 2021, Acadia had introduced deficiencies recognized by the FDA relating to its advertising utility for Pimavanserin in hallucinations and delusions related to dementia-related psychosis. Shares plunged by a large 45%, they usually have but to recuperate since then. Whereas the corporate has continued to develop, the enterprise appears incapable of assembly traders’ previous expectations.

This is likely one of the fund’s highest conviction picks, as Baker Bros nonetheless owns simply over 26% of the corporate’s shares, which have been held since 2010. Whereas the fund has made nice positive factors since, the latest plunge has undoubtedly compressed its unrealized positive factors, because the place was held secure as soon as once more.

BioMarin Pharmaceutical

BioMarin Pharmaceutical Inc. is a biotechnology firm headquartered in San Rafael, California, centered on creating and commercializing revolutionary therapies for uncommon genetic ailments.

The corporate’s major focus is on creating therapies for uncommon genetic issues, notably these with a genetic foundation that leads to enzyme deficiencies. BioMarin’s portfolio consists of merchandise concentrating on ailments reminiscent of hemophilia, phenylketonuria (PKU), and Batten illness.

One in all BioMarin’s notable merchandise is Kuvan, used for the remedy of PKU, a uncommon metabolic dysfunction. The corporate has additionally been actively concerned in advancing gene therapies and different revolutionary approaches to deal with unmet medical wants within the uncommon illness house.

As with all biopharmaceutical firm, BioMarin’s success is carefully tied to the outcomes of scientific trials, regulatory approvals, and market acceptance of its merchandise. So far, the corporate has showcased a strong observe file of income development. Earnings have additionally began to build up.

The fund owns round 2% of the corporate, with a market cap of $16.6 billion. The place was left unchanged within the earlier quarter.

Madrigal Prescribed drugs

Madrigal Prescribed drugs is a clinical-stage biopharmaceutical firm pursuing novel therapeutics for nonalcoholic steatohepatitis, or NASH. Given the encouraging outcomes offered to this point, Madrigal holds the agency conviction that resmetirom possesses the capability to safe the excellence of being the inaugural accepted remedy for addressing sufferers stricken by NASH.

This ailment, often known as Non-Alcoholic Steatohepatitis, poses an escalating worldwide healthcare problem throughout all geographical domains. In america alone, the variety of people grappling with NASH is approximated to be 22 million, with an extra 8 million contending with NASH accompanied by notable liver fibrosis.

Regardless of its constructive latest developments, the corporate’s losses have been widening, whereas its money place has been shrinking, which actually doesn’t sound that encouraging nonetheless.

Madrigal Prescribed drugs is Baker Bros’ sixth-largest place, with the fund promoting 1.4% of its place within the earlier quarter. The fund owns round 10.8% of the corporate’s excellent shares.

Last Ideas

The Baker brothers have constructed a really particular hedge fund. Specializing in a sector that’s difficult to grasp by most traders, the agency has traditionally outperformed the general market over a number of years with its concentrated biotech portfolio.

Efficiency over the previous three years has lagged, but it surely might be a brief part for the fund, which, in spite of everything, focuses on long-term returns. Traders which might be conversant in biotech firms are more likely to discover some hidden gems amongst their holdings.

Nevertheless, most of them comprise dangerous pre-revenue corporations that ought to solely be thought-about upon having an awesome understanding of their enterprise mannequin. Retail traders ought to be cautious of simply “copying” the fund’s portfolio.

Further Sources

If you’re taken with discovering extra high-quality dividend development shares appropriate for long-term funding, the next Positive Dividend databases will likely be helpful:

The most important home inventory market indices are one other strong useful resource for locating funding concepts. Positive Dividend compiles the next inventory market databases and updates them month-to-month: