Top Private Equity Investors in Public Companies (Part 2)
I previously discussed creating a portfolio of 560 publicly-traded stocks based on private equity ownership in each company (the PE-basket). While the last post focused on the overall performance of the PE-basket relative to benchmarks, I thought it would be insightful to look at individual company gains and losses within this basket.
While the average return for the PE-basket was 4.0% over a five-month period, 41 of these companies returned greater than 50%, 11 companies topped 100% and three companies exceeded 200%!
The Top Performers (with 100%+ Returns)
It’s worth noting that Aisling Capital & Foresite Capital are on this list more than once.
For those stocks returning more than 50%, one industry sector stood out, by far… Healthcare. Specifically, Pharmaceuticals and Therapeutics. These sectors are subject to wild swings in valuation based on news-driven events. Apparently, some of them swung in the right direction.
Excluding healthcare related industries, the Software and Communications sectors tended to top the list within the PE-basket.
The Worst Performers
I decided it would be in poor taste to name specific firms on this list. That said, 30 companies in the PE-basket lost more than half their value over this same period. Incidentally, some of the worst performers were also Pharmaceutical and Therapeutic companies. Again, these sectors are highly susceptible to new developments and company-specific news. Consequently, they can be very volatile stocks.
In the near future, I plan to discuss privately held companies in the Pharmaceuticals and Therapeutics sectors – both PE-owned and stand-alone companies. The savvy/enterprising investment banker might see an opportunity here.
Aside: If your firm creates tradable replicating portfolios (ETF-like instruments), and would like to use our data to construct a “publicly-traded private equity holdings” fund, contact me to discuss this in more detail.