Monday April 30, 2012
by Brian J. Egli, S&P Capital IQ. The Outlook
Andrew Acker, portfolio manager of the Janus Global Life Sciences Fund (JAGLX), takes as his mission finding companies that are “addressing unmet medical needs and providing efficient and cost-effective health care solutions.”
Unmet medical needs, Acker explains, include such areas as cancer, Alzheimer’s disease, diabetes, and cystic fibrosis, while cost-effective health care solutions involve primarily lowering health care costs.
Acker says that he and a team of five analysts “have over 75 years of combined investment experience in the health care space.” Each analyst covers about 30 stocks, rating them strong buy, buy, neutral, or sell.
“We take a balanced approach with diversification across geographies, market caps, and subsectors within health care,” says Acker. “By that I mean pharmaceuticals, biotechnology, health care services, and medical devices.”
The fund is long-term focused, aimed at delivering consistently strong returns. “Our goal is to outperform our peers and the broader markets over an economic cycle,” Acker says.
In seeking fund candidates, Acker and his team query physicians, attend medical conferences, and read scientific literature. “We believe in the power of deep fundamental research,” he says. “We seek to understand the sci ence and the business.”
Once a candidate is identified, it is incorporated into a detailed financial model to assess its estimated intrinsic value. A successful candidate is one that trades at a significant discount to this value.
JAGLX typically holds 50 to 70 stocks. As of March 30, 2012, four of its top-10 holdings earned our highest 5-STARS rating by S&P Capital IQ equity analysts: Celgene (CELG), the maker of the blood cancer drug Revlimid; Express Scripts (ESRX); Valeant Pharmaceuticals (VRX); and Mylan (MYL).
“We’ve owned it for nine to 10 years,” says Acker of Celgene. “We were investing in the company when this [Revlimid] was still in early development. And now it’s one of the best-selling cancer drugs in the world, with about $3 billion in sales.”
Acker acknowledges there are risks to investing in companies focused on addressing unmet medical needs.
This can be especially true for companies with a single product, given the numerous clinical trials and regulatory approvals that must be met. “At any step of the way the drug could fail,” Acker says.
“We try to adjust the position of high-risk stocks in the portfolio so that in a worst-case scenario the impact on the portfolio would be less than 1%,” the manager adds.
Acker has been portfolio manager of JAGLX since 2007. “What sets us apart [from peers] is the quality of our team, the depth of our research, and our commitment to generating long-term results for our investors,” he says.
And Acker does eat his own cooking. “I personally have over two years of salary invested in the product,” he attests.
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