We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Alkermes Plc (NASDAQ:ALKS)? The smart money sentiment can provide an answer to this question.
Alkermes Plc (NASDAQ:ALKS) was in 33 hedge funds’ portfolios at the end of December. ALKS investors should be aware of an increase in support from the world’s most elite money managers recently. There were 26 hedge funds in our database with ALKS positions at the end of the previous quarter. Our calculations also showed that ALKS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the 21st century investor’s toolkit there are a multitude of metrics investors use to evaluate publicly traded companies. Two of the most underrated metrics are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the top fund managers can outclass the S&P 500 by a very impressive amount (see the details here).
Alex Denner of Sarissa Capital Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a peek at the fresh hedge fund action encompassing Alkermes Plc (NASDAQ:ALKS).
How have hedgies been trading Alkermes Plc (NASDAQ:ALKS)?
Heading into the first quarter of 2020, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 27% from the third quarter of 2019. By comparison, 19 hedge funds held shares or bullish call options in ALKS a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies holds the largest position in Alkermes Plc (NASDAQ:ALKS). Renaissance Technologies has a $135.4 million position in the stock, comprising 0.1% of its 13F portfolio. On Renaissance Technologies’s heels is Stephen DuBois of Camber Capital Management, with a $84.2 million position; 4.3% of its 13F portfolio is allocated to the company. Other peers that are bullish contain Alex Denner’s Sarissa Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Sarissa Capital Management allocated the biggest weight to Alkermes Plc (NASDAQ:ALKS), around 6.44% of its 13F portfolio. Camber Capital Management is also relatively very bullish on the stock, dishing out 4.28 percent of its 13F equity portfolio to ALKS.
As one would reasonably expect, some big names were breaking ground themselves. Sarissa Capital Management, managed by Alex Denner, initiated the largest position in Alkermes Plc (NASDAQ:ALKS). Sarissa Capital Management had $77.6 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $45.2 million investment in the stock during the quarter. The following funds were also among the new ALKS investors: Kerr Neilson’s Platinum Asset Management, Efrem Kamen’s Pura Vida Investments, and David M. Knott’s Dorset Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Alkermes Plc (NASDAQ:ALKS) but similarly valued. We will take a look at Avista Corp (NYSE:AVA), Houlihan Lokey Inc (NYSE:HLI), Nextera Energy Partners LP (NYSE:NEP), and Mantech International Corp (NASDAQ:MANT). This group of stocks’ market values are closest to ALKS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AVA | 15 | 149256 | -2 |
| HLI | 10 | 128406 | -7 |
| NEP | 17 | 127327 | 1 |
| MANT | 23 | 49724 | 7 |
| Average | 16.25 | 113678 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $114 million. That figure was $568 million in ALKS’s case. Mantech International Corp (NASDAQ:MANT) is the most popular stock in this table. On the other hand Houlihan Lokey Inc (NYSE:HLI) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Alkermes Plc (NASDAQ:ALKS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th and still beat the market by 5.5 percentage points. Unfortunately ALKS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ALKS were disappointed as the stock returned -30.7% during the first two and a half months of 2020 (through March 25th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
