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.
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.
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%.
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.