We recently compiled a list of the Top 10 Holdings of Caligan Partners. In this article, we are going to take a look at where Evolus, Inc. (NASDAQ:EOLS) stands against Caligan Partners' other top holdings.

Founded in 2017, Caligan Partners is one of the most significant specialty hedge funds. David Johnson is the brainchild behind the hedge fund, which has its headquarters in New York, specializing in long-biased activist equity investment strategies. It sometimes invests in distressed debt and investments with high absolute return profiles.

Caligan Partners focuses on investment opportunities in the healthcare sector, primarily in the United States. At present, the industry dominates its holdings, accounting for 100% of its overall value of investments. The firm also invests in long and short positions targeting equity opportunities of public companies in the healthcare sector.

The bulk of the investments in the fund are in small-cap companies. These are stocks with a market capitalization exceeding $100 million, representing 8% of the total value of the investments. Conversely, investments in large-cap stocks are minimal, amounting to just about 0.1% of the total value. The average market capitalization of the companies in the fund's portfolio is around $1.07 billion.

Its current portfolio value is $378 million, with a turnover rate of 18%. Nevertheless, one of the top 10 holdings of Caligan Partners accounts for more than 40% of the hedge fund's portfolio. The performance of stocks bought by Caligan Partners within three months outperforms four times out of 14 transactions compared to the return of the S&P 500 within the same period.

In addition, Caligan Partners also engages in activist investments by pushing for strategic changes that have the potential to grow shareholder value. Management changes are part of the changes the hedge fund advocates in companies where it gets involved, as it often pushes for board seats to influence management decisions and companies' directions.

Caligan Partners is one of the hedge funds that contributed to the strong performance of activist investments in 2023. As activist investors pushed corporations to change leadership and streamline their operations to enhance shareholder value, they generated an average return of 20.2%.

Caligan Partners and other activist investors have gained more power to secure board positions. The investors secured 134 positions on boards in 2023, marking a 30% rise from the year before and the highest number since 2018.

Activist investors also clinched 36 positions in the final round of voting at general meetings in 2023, a 125% rise from the year prior and a record high. They also secured positions in 80% of the campaigns, up from 33% in 2022. Additionally, the hedge fund also urges companies to consider strategic alternatives such as the divestment of some assets or fill sale for companies that have underperformed.

The fact that the top 10 holdings of Caligan partners come from the healthcare sector is not surprising. Healthcare is often considered a defensive sector that tends to outperform in choppy markets as the one experienced last year due to high interest rates. However, that was not the case, as the overall sector underperformed the S&P 500, which was up by 24% by year-end.

The S&P 500 Healthcare Index was down by about 0.4% in 2023. Healthcare company shares fell significantly as the benefits from the pandemic and the rollout of vaccines dropped. Although companies that produce medical devices might have faced a more challenging outlook, those that develop weight loss drugs have performed much more positively. The US Federal Reserve's strategy of raising interest rates and keeping them high for long has been putting pressure on the healthcare industry.

The outlook also does not look suitable for the sector, given that healthcare stocks are pressured during election years as presidential hopefuls pledge reforms targeting drug prices and health insurance. Nevertheless, there is a possibility that Caligan Partners is one of the hedge funds that will benefit investors, taking note of depressed valuations in the healthcare sector. The sentiment among investors and experts in the healthcare field is unexpectedly optimistic. Although many anticipate moderate expansion and certain areas are in a stronger position than the rest, there's a widespread feeling that the industry is set for a recovery.

Methodology

Caligan Partners is one of the top specialty hedge funds specializing in healthcare stocks, often considered defensive plays when the economy faces uncertainties. In this article, we discuss the top 10 holdings of Caligan Partners and why they stand out for gaining exposure in the healthcare stocks. We referred to the original 13F filing by Caligan Partners on the SEC's website to determine the hedge fund's stake in each stock. The stocks are ranked based on the hedge fund's equity value.

At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

A patient in a medical aesthetics clinic smiling joyfully, showing the temporary improvement in appearance from the botulinum toxin type A formulation.

Evolus, Inc. (NASDAQ:EOLS)

Caligan Partners' Equity Stake: $26.44 Million

Number of Hedge Fund Holders: 24

While Evolus, Inc. (NASDAQ:EOLS) operates in the healthcare sector, it specializes in developing and commercializing beauty products to enhance adult appearances. The beauty company is flexing its muscle in the aesthetics markets, focusing on the next generation of beauty consumers.

Evolus, Inc. (NASDAQ:EOLS) has been up by more than 20% for the year. The rally comes on the company delivering impressive Q1 2024 results whereby revenues were up by 42% to $59.3 million, affirming it is on course to achieve $700 million in revenue by 2028. Evolus, Inc. (NASDAQ:EOLS) is also on track to achieve profitability in Q4 and full-year profit by 2025.

Another factor boosting the beauty company's rise is the report that its Jeuveau (DWP-450) (prabotulinumtoxinA) is expected to be a strong competitor to Allergan's Botox (botulinum toxin type A) for treating severe glabellar (frown) lines. A total of 24 hedge funds tracked by Insider Monkey held stakes in Evolus, Inc. (NASDAQ:EOLS) in Q1 2024.

Overall EOLS ranks 4th on our list of Caligan Partners' top holdings. You can visit Top 10 Holdings of Caligan Partners to see the other stocks that are on hedge funds’ radar. While we acknowledge the potential of EOLS as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than EOLS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.