According to two hedge fund chief investment officers, the gaming and biotech sectors are attractive potential alpha generators. And they liked two stocks in particular.
Alexander Denner of Sarissa Capital Management and Samantha Greenberg of Margate Capital Management shared their best ideas Wednesday at the CNBC and Institutional Investor Delivering Alpha Conference.
Their top picks? For Denner, it was Biogen (BIIB), while Greenberg pitched Take-Two Interactive Software (TTWO). After the two hedge fund managers shared their ideas, each company’s stock jumped.
Biogen is a biotech company focused on neuroscience, a pharmaceutical sub-sector that he believes is positioned for the explosive growth that companies focused on cancer treatments saw over the past decade. “Neuroscience is in a place where cancer was a decade ago,” Denner said at the Pierre Hotel Wednesday. “There’s a big, unmet need. We’re just now getting to understand what the problems and malfunctions are that lead to some of the disorders. It’s possible that could turn into a big development over time.”
Biogen’s key business line is multiple-sclerosis drugs, according to Denner. The firm doesn’t have any new MS drugs in its pipeline, but it has a continued revenue stream from a royalty deal it set up with a competitor. Denner also said that Alzheimer’s treatment is ripe for Biogen’s development. “We have a core business producing an enormous amount of cash flow,” he said, adding that the company has “promising pipeline positions.”
Following Denner’s presentation, Biogen’s stock was roughly $2, hitting $358 per share as of 3:30 p.m. EST.
As for Greenberg, video-game maker Take-Two Interactive was her best stock idea for creating alpha. The company creates such games as Grand Theft Auto and the NBA series. “The video game business model is undergoing a transformation,” Greenberg said. “You have numerous free options for gaming. Engagement with video games continues to grow. Sixty percent of teenagers play video games.”
As a result, Greenberg’s firm is bullish on the gaming sector generally, pointing to a changing business model. “The sector used to be a hit-driven model tied to new releases,” Greenberg said. “Today, because video games are tied to the internet, they can continually update the content.” What sets Take-Two apart from others in the business is the company’s “hit rate,” or the number of well-liked video games they’re able to put out. According to Greenberg, it’s the highest in the industry.
Following her presentation, Take-Two’s stock popped, hitting $127.60 per share, up 1.18 percent or more than $1 as of 3 p.m. EST.