The Baker Brothers Advisors LP have become one of the most followed biotech investors around. As of the end of the first quarter of 2018, it has become incredibly clear that the firm has placed massive bets on just a handful of companies.

The equal-weighted Whalescore for the Bakers fell in the first quarter to 70 from the previous quarter’s ranking of 76. However, it was still higher than the S&P 500’s score of 62, which was unchanged from the previous quarter. Every quarter, WhaleWisdom ranks filers against one another and the S&P 500 based on their ability to generate alpha.

(WhaleWisdom)

The Top 5

The Bakers have massive positions among their top 5 holdings. Based on the data collected through filings, the market value of the Baker’s portfolio is about $15.6 billion as of the end of the first quarter, up from $12.2 billion in the fourth quarter of last year. Of that, about $10 billion or roughly 64% of the holdings are in these five stocks.

(WhaleWisdom)

2 Big Positions

Even more impressive is the total amount of each company they own. Seattle Genetics Inc. (SGEN) is the firm’s largest holding, with a market value of roughly $3.5 billion; the Bakers hold a nearly 32% stake in the company. Incyte Corp. (INCY) is the firm’s second largest holding, with a market value of almost $2.6 billion. The Bakers control nearly 16% of that stock. Approximately $6.1 billion is committed to these two companies and represents almost 40% of their portfolio.

The Next 3

The following three companies have a market value of about $3.8 billion and account for 24% of the Baker’s portfolio. The advisor’s position in BeiGene Ltd. (BGNE) is worth about $1.6 billion while owning about 20% of the company. Alexion Pharmaceuticals Inc. (ALXN)  is next, with a market value of $1.1 billion and ownership of about 4%. Finally, Acadia Pharmaceuticals Inc. (ACAD) is in the fifth position, with a market value of approximately $1.1 billion and ownership of 32%.

Big Risks

With the amount of money committed to the top of the portfolio, the firm is taking a significant risk. The most significant threat is the investment risk. Should an investment turn sour, its price could fall, creating massive losses. Additionally, liquidity is another risk as trying to sell the number of shares accumulated would not be easy. Also, in some cases such an action would require a filing with the SEC, making other investors aware of the firm’s intention to sell their holdings.

It does speak to a large degree of confidence that the Bakers have in these investments too. By in large, they are investments that have worked in the Baker’s favor over the years. It is also one of the reasons why the Bakers are regularly ranked among the best on the WhaleWisdom Whalescore.

Perceptive Advisors, LLC scored big this past week when it was announced that Pfizer Inc. (PFE) was buying Array BioPharma Inc. (ARRY) for $11 billion. Array’s stock rose by more than 50% on June 17 following the announcement. Perceptive is run by Joseph Edelman, which started a new position in Array in the first quarter of 2019.

The move by Pfizer to purchase Array will help to broaden Pfizer’s cancer pipeline. Pfizer is buying Array for $48 per share, a nearly 62% premium to the stock’s closing price of $29.59 on June 14. The deal is expected to close in the second half of 2019.

A Big Profit

Perceptive purchased nearly 4.3 million shares of Array in the first quarter, worth almost $105 million. It made the stock the eleventh largest holding in the firm’s portfolio. Based on Array’s closing price on June 21 of $46.20, the value of Perceptive’s position rose to $195.4 million. It gives Perceptive a profit of nearly $90 million and a gain of 90% in under 3 months.

(WhaleWisdom)

In Need of Growth

Pfizer needed an acquisition. The company has struggled in recent years to grow its revenue. Since July of 2016, Pfizer’s revenue has increased by just 3% on a trailing twelve-month basis to $53.9 billion. Additionally, growth for the future was looking bleak too. Analysts were forecasting revenue to grow by just 5% over the next three years to $56.3 billion.

Waiting for the Benefits

The bad news for Pfizer is that the deal is expected to be dilutive to earnings in 2019 and is not expected to be accretive until the year 2022. It means that over the short-term, the Array deal isn’t likely to help boost Pfizer’s growth prospects.

Analysts were forecasting revenue for Array of $273 million in 2019, and it is expected to grow to $664 million in 2021. Additionally, the company is forecast to lose $0.50 per share in 2019 and to not turn a profit until 2021, earning $0.67 per share.

Array currently has two drugs on the market for melanoma, BRAFTOVI and MEKTOVI. Additionally, the company is working on a Phase 3 trial for the treatment of colorectal cancer.

Pfizer is taking a long-term view buying Array, hoping that the company will deliver significant growth in future years. However, Perceptive has the good fortune of being able to cash out early and is reaping the reward in a short period of time. It turned out to be a good bet for Perceptive; only time will tell if Pfizer will have the same luck.

Boeing Co.’s (BA) stock has fallen by 21% since peaking in early March. The sharp decline has come following two crashes of its 737 MAX jets and the grounding of the fleet around the world. The recent developments have hampered the stock as investors have lost visibility into the future of the company.

Institutional and hedge fund investors went from accumulating the stock in the fourth quarter of 2018 to dumping it in the first quarter of 2019. Still, the stock managed to land on the WhaleWisdom Heatmap at 26, up from 84. The stock may have had an even higher ranking if not for the developments at the end of the first quarter. The high ranking is likely to fall further as second quarter filing results start to come in, given that the stock continued to decline since the end of the first quarter.  

Turning Bearish

During the first quarter, the number of aggregate institutional 13F shares fell by 3% to 382.5 million from 394.3 million. That included a decline of more than 10% among hedge funds, which saw the total number of 13F shares fall to 16.3 million from 18.3 million. In total, 202 institutions created new positions, while 761 added to existing ones. Additionally, 123 institutions closed out their positions, while 879 reduced their holdings.

(WhaleWisdom)

Falling Sharply

Shares of the aerospace company fell sharply in March after a second 737 MAX jetliner crashed. It resulted in the grounding of the fleet around the world. That grounding had not been lifted as of June 15, as the company and investigators try to identify the problem with the plane and develop a fix.

As a result of the crash, the company pulled its full-year earnings guidance, which has resulted in analysts cutting their revenue and earnings guidance. Since the beginning of April, analysts have slashed their earnings estimates for the company for 2019 by 22% to $15.73, down from $20.09. Meanwhile, revenue estimates for the year have fallen by as much as 9% to $102 billion from $110.9 billion.

The average analysts’ price target on the stock has fallen slightly since the middle of April to $426 from $431. Meanwhile, the number of analysts rating the stock a buy or outperform has fallen to 14 from 15, while the number of analysts rating the stock a hold has increased to 8 from 7.

Since the end of the first quarter, the stock has declined by over 12%, and the visibility surrounding the future of the 737 MAX jetliner still appears to be uncertain. It has created a tremendous amount of pressure on the stock and given the declines, it seems highly likely that institutions and hedge funds will continue to dump the equity.

Snap Inc. (SNAP) may be the comeback story of 2019, with the stock up more than 150% thus far. Hedge funds were buying Snap aggressively in the first quarter as the shares were rising off their December lows.  Even since the end of the first quarter, the stock has continued to rise, and it may very well be the case that the hedge funds are still buying the equity.

The public debut of Snap is one that many investors would like to forget. The stock came public in March 2017 and saw its stock price decline by almost 80% through the end of 2018. It could be one of the more disastrous IPO’s in recent memory. The stock resurgence has landed it in the WhaleWisdom WhaleIndex 100 as of May 15, and it has risen by over 20% since the addition.

Piling In

During the first quarter, the aggregate number of 13F shares held among hedge funds more than doubled, rising to 93.5 million from 44.9 million. Additionally, the number of total shares among institutions increased by over 13% to 350.7 million from 309.6 million. In total, 24 hedge funds created new positions in the stock, while 13 added to existing holdings. Meanwhile, 8 hedge funds reduced their stakes, while 8 exited the stock.

(WhaleWisdom)

Adding Users

One reason for the stock’s resurgence has been a return to growth for its daily active users. During the first quarter, daily active users increased by 4 million sequentially to 190 million. Additionally, the company reported better than expected revenue and a smaller loss, as well as providing better than expected second quarter guidance.

Improving Outlook

For the second quarter, analysts now estimate that revenue will increase 36% year-over-year to $357 million. Meanwhile, analysts are forecasting a loss of $0.10 per share, which is better than the loss of $0.14 in the same quarter a year ago.

The strong revenue growth is expected to continue for the full year of 2019, with revenue climbing by 35% to    $1.59 billion. Meanwhile, the company is forecast to see a loss of $0.30 per share, an improvement from a loss of $0.47 per quarter a year ago.

Since the completion of the first quarter, the stock has continued to rise, increasing  by 26%. It would suggest that investors are still very interested in the stock and that hedge funds are even actively buying shares.

If Snap can keep the business turn around going, perhaps the stock can one day even get back to its IPO price.

Berkshire Hathaway Inc., led by iconic investor Warren Buffet, made a couple of surprising moves in the first quarter of 2019. The most astonishing move was the addition of Amazon.com Inc. (AMZN) to the portfolio, as well as adding to its already enormous position in JPMorgan Chase & Co. (JPM).  Meanwhile, the firm continues to reduce its significant stake in Wells Fargo Co. (WFC). But overall, the bank stocks appear to be the focus of the firm as of right now.

WhaleWisdom estimates that the value of Berkshire Hathaway’s 13F holdings increased by almost 9% in the first quarter to $199.5 billion. That was slightly below the performance of the S&P 500 during the same period, which increased by over 13%.  The firm’s top holdings represent nearly 80% of the portfolio’s total value.

(Whale Wisdom)

Buying Amazon

During the first quarter, the firm purchased the shares of e-commerce giant Amazon. Berkshire initiated a position in the stock by purchasing just over 483,000 shares, worth about $860 million. However, the position doesn’t even rank in the top-10 of Berkshire’s holdings. The stock’s position comes in at 27 out of the 48 reported holdings, making it a tiny position for the firm.

The addition of Amazon may be considered by most to be a surprising incorporation to the portfolio considering the firm’s reluctance to add technology stocks to its holdings. However, given the size of the position, it is not likely to have a significant impact on the portfolio if it doesn’t work out.

(Whale Wisdom)

Adding More JPMorgan

Berkshire continued to buy shares of JPMorgan during the first quarter, adding almost 9.4 million shares, bringing the total up to 59.5 million shares. Of course, this follows the fourth quarter’s addition of over 14 million shares. It made JPMorgan the 8^th largest holding in the Berkshire portfolio. Additionally, Bank of America, Corp. moved up to the firm’s second most significant position. Overall, bank stocks are half of the firm’s top 10 portfolio holdings.

Dumping Wells Fargo

Wells Fargo is one stock that appears to be out of favor with Berkshire, as the firm continues to shed its position in the equity. During the first quarter, Berkshire sold 17 million shares of the bank, which follows the 16 million shares sold in the fourth quarter. The bank stock fell to the third largest holding in the Berkshire portfolio, and if the current pace of selling continues it could fall out of the top 5 holdings, moving below Coca-Cola Co. (KO) and American Express Co. (AXP) in the second quarter.

(Whale Wisdom)

Additionally, Berkshire reduced its stake in Phillips 66 Co. (PSX) by more than 50%, dropping the holdings to 5.5 million shares. They also sold off almost 20% of their stake in Charter Communications, Inc. (CHTR)

For the most part, outside of Amazon, the first quarter seemed to be a continuation of what happened in the fourth quarter, while the bank stocks appear to remain the firm’s main focus.