Baker Bros Special Report

With money flowing into healthcare, biotech is breaking out and emerging as one of the most attractive areas in the market.

When it comes to biotech investing, no one commands more respect than Felix and Julian Baker.

For decades, Baker Bros Advisors has built a reputation for identifying innovative biotechnology companies and taking large stakes in them before they become widely recognized. 

They don’t just have a consistent track record of booking major winners in the biotechnology and life sciences space; they're also one of the top-performing hedge funds, period.

For this reason, we track their activity as closely as we do for any institution we follow with Hot Corner. The fact that biotech stocks are embarking on a brand new bull market makes us even more interested in how they’re investing these days.

Of course, that doesn't mean we blindly buy whatever they own.

But when investors with that level of expertise are initiating new positions, adding exposure, or increasing conviction in existing holdings, we want to know about it… and maybe ride those trends higher with them.

Their portfolio currently consists of 83 positions, giving us a unique window into where some of the smartest capital in biotech is being deployed.

Here are the top holdings:

For years now, Incyte $INCY and BeOne Medicines $ONC have been the two largest positions. These high-conviction investments make up roughly 35% of the Baker Bros portfolio.

Baker Bros first initiated a position in Incyte back in 2001. It’s not uncommon for them to hold their investments with an extremely long-term view.

The stock has spent the better part of the last decade going nowhere, quietly carving out a massive rounding bottom. Today, price is pressing against the upper bounds of that range, which also coincides with the 61.8% retracement of the entire decline.

A decisive breakout above 113 would complete the reversal and could kick off a new leg higher. We’re targeting 153.

But position size in the Baker Bros portfolio only tells part of the story.

This chart shows the size of each position as a percentage of outstanding shares owned– another logical measure of the firm's investment conviction.

Viewed through this lens, Kodiak Sciences $KOD and Acadia Pharmaceuticals $ACAD stand out, with Baker Bros owning approximately 35% and 25% of the companies, respectively.