Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Alkermes Plc (NASDAQ:ALKS).
Is Alkermes Plc (NASDAQ:ALKS) undervalued? Hedge funds were taking an optimistic view. The number of long hedge fund bets inched up by 5 in recent months. Alkermes Plc (NASDAQ:ALKS) was in 36 hedge funds’ portfolios at the end of June. The all time high for this statistic was previously 34. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ALKS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 31 hedge funds in our database with ALKS holdings at the end of March.
According to most market participants, hedge funds are assumed to be underperforming, outdated financial tools of years past. While there are over 8000 funds trading at the moment, Our researchers hone in on the leaders of this club, about 850 funds. These money managers preside over the lion’s share of all hedge funds’ total asset base, and by following their first-class stock picks, Insider Monkey has revealed a number of investment strategies that have historically beaten the market. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.
Alex Denner of Sarissa Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s go over the latest hedge fund action regarding Alkermes Plc (NASDAQ:ALKS).
Do Hedge Funds Think ALKS Is A Good Stock To Buy Now?
At Q2’s end, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of 16% from the previous quarter. By comparison, 26 hedge funds held shares or bullish call options in ALKS a year ago. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
The largest stake in Alkermes Plc (NASDAQ:ALKS) was held by Sarissa Capital Management, which reported holding $291.1 million worth of stock at the end of June. It was followed by Renaissance Technologies with a $129.4 million position. Other investors bullish on the company included Camber Capital Management, Armistice Capital, and Holocene Advisors. In terms of the portfolio weights assigned to each position Sarissa Capital Management allocated the biggest weight to Alkermes Plc (NASDAQ:ALKS), around 23.14% of its 13F portfolio. Healthcare Value Capital is also relatively very bullish on the stock, dishing out 7.33 percent of its 13F equity portfolio to ALKS.
Now, key hedge funds have been driving this bullishness. Holocene Advisors, managed by Brandon Haley, established the largest position in Alkermes Plc (NASDAQ:ALKS). Holocene Advisors had $54.1 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also initiated a $12 million position during the quarter. The other funds with new positions in the stock are Kenneth Squire’s 13D Management, Bhagwan Jay Rao’s Integral Health Asset Management, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Alkermes Plc (NASDAQ:ALKS) but similarly valued. These stocks are Option Care Health, Inc. (NASDAQ:OPCH), Sabra Health Care REIT Inc (NASDAQ:SBRA), Glaukos Corporation (NYSE:GKOS), Arconic Corporation (NYSE:ARNC), Korn Ferry (NYSE:KFY), Brighthouse Financial, Inc. (NASDAQ:BHF), and ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD). This group of stocks’ market valuations are closest to ALKS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OPCH | 31 | 342676 | 0 |
| SBRA | 14 | 100037 | -7 |
| GKOS | 19 | 51490 | 1 |
| ARNC | 30 | 1000061 | 4 |
| KFY | 21 | 247721 | 5 |
| BHF | 26 | 494240 | -2 |
| ACAD | 21 | 1390015 | -12 |
| Average | 23.1 | 518034 | -1.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.1 hedge funds with bullish positions and the average amount invested in these stocks was $518 million. That figure was $898 million in ALKS’s case. Option Care Health, Inc. (NASDAQ:OPCH) is the most popular stock in this table. On the other hand Sabra Health Care REIT Inc (NASDAQ:SBRA) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Alkermes Plc (NASDAQ:ALKS) is more popular among hedge funds. Our overall hedge fund sentiment score for ALKS is 90. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 21.8% in 2021 through October 11th but still managed to beat the market by 4.4 percentage points. Hedge funds were also right about betting on ALKS as the stock returned 27.5% since the end of June (through 10/11) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Follow Alkermes Plc. (NASDAQ:ALKS)
Follow Alkermes Plc. (NASDAQ:ALKS)
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Disclosure: None. This article was originally published at Insider Monkey.
