Arthur Cohen and Joseph Healey have taken health-care investing by storm with two hedge funds. One, called SAC Healthco, set up in August, is open to the public and is up 34%. The other, run exclusively for SAC Capital Management LLC, is up over 80% since February (after fees of 50%). "It's like combining Michael Jordan and Shaquille O'Neal in one team," says Joseph L. Dowling, managing partner at Narragansett Asset Management LLC in New York.
Cohen, 39, and Healey, 34, learned the business at such giant funds as Tiger Management Corp., where Cohen was managing director, and Kingdon Capital Management, where Healey managed a health-care portfolio. Last year, Cohen and Healey partnered with SAC Capital, a $3 billion hedge fund that is Healthco's largest investor.
When looking for stocks to short, Cohen and Healey seek out companies that have poorly designed clinical trials or weak business models. Genomics, the new Holy Grail in genetic research, is the pair's focus at present. "It's very similar to the Internet bubble," says Healey. "There will be a lot of companies that just go away."
Still, there are plenty of healthcare companies with lots of potential. One of their big winners last year was Cell Therapeutics Inc., which has a new leukemia drug. They bought at $12 a share in a private placement, and the stock eventually reached $74. "There are phenomenal opportunities in health care," says Cohen. "It's one-seventh of the economy, and it's not going away."
By Debra Sparks