While famed value investors like Warren Buffett (Trades, Portfolio) and Seth Klarman (Trades, Portfolio) get most of the attention, there are plenty of other portfolio managers that have similar long-term track records. Joseph Edelman, the founder of Perceptive Advisors, is one such investor.
FOMX 15-Year Financial Data
The intrinsic value of FOMX
Peter Lynch Chart of FOMX
Since its inception in 1999, Edelman's portfolio has generated annual returns in excess of 30%. Down years have been rare. You may not have heard of him since he only manages a few billion dollars. Buffett's Berkshire Hathaway (BRK-A)(BRK-B), for comparison, has a market value of more than $500 billion.
Perceptive Advisors focuses exclusively on the biotech sector, meaning it needs to keep its asset base small. If its portfolio grows too large, it won't be able to invest in many of the smaller companies in the space. While it holds interests in many multibillion-dollar companies, Edelman has dozens of positions that have market caps of under $500 million.
While the limited size of these opportunities likely will never bring Edelman worldwide fame, they're still large enough for most individual investors to follow his best ideas. Here are two of his most intriguing picks, aggregated using Perceptive Advisors' 13-F filings.
Foamix Pharmaceuticals Ltd. (FOMX)
Small-cap biotech stocks are nearly always mispriced, sometimes grossly so. This year, Foamix has multiple milestones that could drive 300% in upside, even using conservative estimates.
The company has two lead drug candidates: FMX101 and FMX103. I suggest you read my full write up for the details, but in total, these drugs could easily generate $300 million in annual sales. Edelman often uses a 3 times peak sales multiple to value potential drugs, though he will occasionally use multiples as high as 6 times sales.
Applying a conservative 3 times sales multiple produces a $900 million potential valuation for Foamix. With a current valuation of just $200 million, the investment case seems very attractive.
That's probably why Perceptive Advisors bought 1,554,400 shares last quarter, bringing its total holding up to 4,661,824 shares, nearly 9% of the company. With an average purchase price of around $5.50, this is a great way to follow Edelman's bet given the stock is currently trading under $4 a share.
This article was from April since then he more than doubled his stake in FOMX as approval drew near to 18.4% speaks volumes
Catch flippers share, never ask slap if your an investor
