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Parsing Portfolios on the Buy Side

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Parsing Portfolios on the Buy Side

Who’s holding genomics technology stocks?

By Dennis Waters

Publicly traded genomics technology stocks run the gamut from big, established vendors of equipment and consumables to small software and data startups. We track 33 of them in the Genome Technology Index (see p. 42).

Institutional money managers who decide how to invest other people’s money are the ultimate arbiters of the value of these companies. These folks are the so-called “buy side.” Those who make good decisions get more money to invest and those who don’t, don’t.

It’s no secret that the American stock market is grand in scale. Thousands of money managers are responsible for trillions of dollars and portfolios ranging in size over several orders of magnitude. Here we divide them into the Very Very Big (portfolios worth $100 billion or more), Very Big ($10 billion or more), Big ($1 billion or more), and Not So Big (less than $1 billion).

In recent months, our 33 GTI stocks have been diminishing in value, but they still constitute relatively large chunks of some portfolios. We’ve selected a few notable examples in each group to give you a sense of how genomics technology fits into the overall market.

 

Very Very Big — $10/11 or More

The biggest of the big investment managers have portfolios so large they are almost proxies for the stock market itself. They make massive investments, hold big positions and, as a practical matter, can’t deal very well with small-cap companies. Not surprisingly, they are among the biggest shareholders of the biggest companies in the GTI.

Fidelity manages almost half a trillion dollars, so allocating a mere $2.23 billion to genomics technology stocks allows it to control large positions in some of the industry’s biggest companies. Putnam, at only half Fidelity’s size, manages to be the single largest shareholder in Applied Biosystems. Still, it would be virtually impossible for a manager of this size to have more than one percent of its assets in genomics technology.

Very Big — $10/10 or More

One step down on the big-investment-managers ladder are most other large mutual fund companies and big managers of institutional portfolios such as pension funds. Managers of this size have a little more flexibility to specialize, but they’re still throwing around a lot of cash.

The six managers listed below have portfolios of hundreds of millions of dollars invested in genomics technology stocks. In recent years, many of these stocks have found their way not only into biotech, life sciences, and healthcare portfolios but also into high-growth portfolios. Thus the managers with big genomics technology investments include those with credible biotech funds, such as T. Rowe Price, as well as those focused on growth stocks of all persuasions, such as Pilgrim Baxter.

Big — $10/9 or More

Get below $10 billion under management and things begin to get interesting. Money managers now have to specialize — no more big, consumer-oriented mutual fund companies. This is the realm of the large hedge fund and the boutique institutional manager. Funds of this size have to make big bets in order to be players — and the funds making the big bets in genomics technology find they have to invest five percent or more of their assets in order to get significant positions.

Of particular note are two publicity-shy managers, Essex and Pequot. Both have developed expertise in genomics and both have active venture capital operations in addition to investing in the public markets. Essex is probably best known for managing Bill and Hillary Clinton’s blind trust during the first half of their White House tenure — and it also has managed a large part of Cold Spring Harbor Laboratory’s endowment for many years.

Pequot is one of the most successful hedge funds in the world and, even after the recent departure of one of its founders, one of the largest. It is Incyte’s largest institutional shareholder. Kopp and OrbiMed, meanwhile, are the largest institutional shareholders of Molecular Devices and Orchid, respectively.

Not So Big — less than $10/9

The smallest institutional money managers are the true boutiques — many of them hedge funds catering to high-net-worth individuals. The three listed below manage less than $2 billion among them, yet their genomics technology holdings total more than $170 million. All three specialize in biotech, life sciences, and health-care — Aries and DCF almost exclusively and Orbitex to the tune of about 50 percent of its portfolio.

Seducing the Most Sizable

For genomics technology companies, the practical effects of these institutional ownership patterns fall into two categories. First, having an institutional investor as a large shareholder for the long term means keeping it informed, keeping it happy, taking its phone calls, etc. Second, it means remembering that even big positions can be dumped quickly if a high-growth manager concludes that yours is no longer a high-growth stock.

But these are good problems to have if you’re a genomics technology company that has managed to get an IPO done. Next step: getting big enough that the Fidelitys and Putnams of the world will take notice.

About the Data

Buy-side money managers are required to file a list of their holdings with the US Securities and Exchange Commission at the end of each calendar quarter. These filings (called 13Fs) begin to trickle into SEC’s EDGAR database within a few weeks of the calendar close and are almost all in within about 45 days. Thus, as you read this, the last of the 13Fs for the period ending March 31, 2001 are being filed. They were not available for this report, which is based on December 31, 2000 data. The first quarter in the stock market was, shall we say, eventful and so the details of valuations and holdings may now differ drastically from what is here.

 

Very Very Big

Money Manager Assets Under Management Core Genome Technology Index Holdings (% of co. owned)

Fidelity Management & Research, Boston

GTI: $2.23 billion,

Total: $494.3 billion,

Portion of portfolio in GTI: 0.45%

14.6% of Affymetrix

12.2% of Celera Genomics

6.2% of Applied Biosystems

5.2% of DeCode Genetics

4.2% of Aclara BioSciences

Putnam Investment Management, Boston

GTI: $2.01 billion

Total: $235.2 billion

Portion of portfolio in GTI: 0.86%

8.5% of Applied Biosystems

6.5% of Invitrogen

3.8% of Molecular Devices

Capital Research & Management, Los Angeles

GTI: $997 million

Total: $216.8 billion

Portion of portfolio in GTI: 0.46%

3.9% of Applied Biosystems

3.6% of Affymetrix

2.0% of Caliper Technologies

 

Very Big

Money Manager Assets Under Management Core Genome Technology Index Holdings (% of co. owned)

T. Rowe Price Associates, Baltimore

GTI: $673.2 million

Total: $89.6 billion

Portion of portfolio in GTI: 0.75%

7.3% of Molecular Devices

6.7% of Aurora Biosciences

4.3% of Incyte Genomics

4.1% of Invitrogen

3.7% of Deltagen

3.2% of Affymetrix

3.0% of Visible Genetics

Franklin Resources,
San Mateo, Calif.

GTI: $510.2 million

Total: $74.3 billion

Portion of portfolio in GTI: 0.69%

14.8% of Visible Genetics

6.6% of Packard BioScience

6.3% of Luminex

3.1% of Orchid BioSciences

3.1% of Molecular Devices

Nicholas-Applegate Capital Management,
San Diego

GTI: $465 million

Total: $32.34 billion

Percent of portfolio in GTI: 1.4

4.6% of Invitrogen

1.3% of Lion Bioscience

Pilgrim Baxter & Associates, Wayne, Pa.

GTI $454 million

Total $14.99 billion

Portion of portfolio in GTI: 3.0%

5.2% of Molecular Devices

3.8% of Invitrogen

3.4% of Aurora Biosciences

3.1% of Incyte Genomics

Invesco Funds Group, Denver

GTI: $417.8 million

Total: $37.6 billion

Portion of portfolio in GTI: 1.1%

12.0% of Genomica

4.6% of Orchid BioSciences

3.3% of Invitrogen

Waddell & Reed Financial,
Overland Park, Kan.

GTI: $219.3 million

Total: $26.1 billion

Portion of portfolio in GTI: 0.84%

7.5% of Aclara BioSciences

6.6% of Gene Logic

4.9% of Incyte Genomics

 

Big

Money Manager Assets Under Management Core Genome Technology Index Holdings (% of co. owned)

Essex Investment Management, Boston

GTI $435 million

Total $8.92 billion

Portion of portfolio in GTI: 4.9%

9.2% of Cepheid

5.8% of Variagenics

5.4% of Packard BioScience

3.7% of Bruker Daltonics

Private equity: Geneva Proteomics, Third Wave Technologies

Pequot Capital Management,
Westport, Conn.

GTI $325 million

Total $8.18 billion

Portion of portfolio in GTI: 4.0%

10.8% of Incyte Genomics

Other important holdings: Rosetta Inpharmatics, Compugen, Applied Biosystems

Private equity: DNA Sciences, Spotfire

Kopp Investment Advisors, Edina, Minn.

GTI $210 million

Total $4.87 billion

Portion of portfolio in GTI: 4.3%

13.3% of Molecular Devices

7.5% of Gene Logic

OrbiMed Advisors,
New York

GTI $160 million

Total $1.68 billion

Portion of portfolio in GTI: 9.6%

7.5% of Orchid BioSciences

5.3% of Caliper Technologies

1.6% of Celera Genomics

 

Not So Big

Money Manager Assets Under Management Core Genome Technology Index Holdings (% of co. owned)

Aries Financial Services, New York

GTI $80.7 million

Total $939 million

Portion of portfolio in GTI: 8.6%

3.3% of Caliper Technologies

1.0% of Orchid BioSciences

1.0% of Ciphergen Biosystems

Orbitex Management, New York

GTI $53.3 million

Total $502.4 million

Portion of portfolio in GTI: 10.6%

1.7% of Variagenics

1.5% of Rosetta Inpharmatics

1.4% of Orchid BioSciences

DCF Capital,
Greenwich, Conn.

GTI $39 million

Total $474 million

Portion of portfolio in GTI: 8.2%

3.2% of Lynx Therapeutics

3.1% of Visible Genetics

1.3% of Molecular Devices

1.3% of Genomica

 

MOST WANTED BY MAJOR PLAYERS

While blue-chip public companies such as General Electric have thousands of institutional shareholders, most companies in the Genome Technology Index have only a few dozen. Even the most widely held — Applied Biosystems — has only a few hundred.

Most of the companies in the GTI are (a) too small or (b) too new or (c) too illiquid to have attracted broad interest — but when a stock is big enough to be widely held it is big enough to attract the large institutions and the boutiques that can take big positions.

The companies listed here have enticed three or more major investors to take holdings of 3% or more.

GENOMICS TECHNOLOGY COMPANY/LARGEST INSTITUTIONAL SHAREHOLDERS

Applied Biosystems

8.5 % by Putnam Investment Management

6.2 % by Fidelity Management & Research

3.9 % by Capital Research & Management

Affymetrix

14.6 % by Fidelity Management & Research

3.6 % by Capital Research & Management

3.2 % by T. Rowe Price Associates

Gene Logic

13.3 % by Kern Capital Management

9.8 % by Wellington Management

7.5 % by Kopp Investment Advisors

6.6 % by Waddell & Reed Financial

Incyte Genomics

10.8 % by Pequot Capital Management

4.9 % by Waddell & Reed Financial

4.3 % by T. Rowe Price Associates

Invitrogen

6.5 % by Putnam Investment Management

6.2 % by American Express Financial

4.6 % by Nicholas-Applegate Capital Management

4.1 % by T. Rowe Price Associates

3.8 % by Pilgrim Baxter Associates

3.3 % by Invesco Funds Group

Molecular Devices

13.3 % by Kopp Investment Advisors

7.3 % by T. Rowe Price Associates

5.4 % by Scudder Kemper Investments

5.2 % by Pilgrim Baxter Associates

3.8 % by Putnam Investment Management

3.1 % by Franklin Resources

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