Here’s What Mott Capital Management Thinks About Netflix, Alkermes, Vodafone & More

Mott Capital Management was founded in 2014 by Michael J. Kramer. Kramer is a thematic growth investor, who focuses on general themes and trends in the society and identifies investments based on them. According to its fourth-quarter letter to investors, Mott Capital lost 2.10% last year net of fees and transaction costs, underperforming the S&P 500, which advanced by around 12%. The investor said that one of the main factors behind the lagging returns was the uncertainty and the market registered new highs only in the last seven weeks of the year, mainly due to growth registered by Financials, Energy, Industrials, and Materials sectors.

“For the most part, many of our companies just did not perform in 2016 despite hitting on many of the expectations and hopes I had planned on when starting 2016,” Mott said.

Among Mott Capital’s top winners in 2016 were Netflix, Inc. (NASDAQ:NFLX) and NXP Semiconductors NV (NASDAQ:NXPI). On the other hand, Alkermes Plc (NASDAQ:ALKS) and Vodafone Group Plc (ADR) (NASDAQ:VOD) were the fund’s biggest loser in 2016, even though in the fourth quarter Alkermes ranked among the top gainers. In this article, we are going to take a closer look at Mott’s comments about these companies, as well as see why it closed its stake in Hain Celestial Group Inc (NASDAQ:HAIN) during the fourth quarter of 2016.

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Netflix, Inc. (NASDAQ:NFLX), whose shares advanced by 26.60% during the fourth quarter and by 27.30% during the full 2016, was Mott Capital’s top winner in both periods. The investor pointed out the strong performance of the company’s stock during the fourth quarter on the back of its better-than-expected results for the third quarter. Mott Capital considers that Netflix, Inc. (NASDAQ:NFLX) well-positioned ahead of the market’s transition to “On-Demand”.

“The On-Demand Generation is the generation following the Millennial’s, the Children born around or after 2010. These Children, my Children, are growing up in a world of constant media content. These Children have the ability to watch what they want, when they want, and where they want. They are growing up in the era of the YouTube Star, gone are the days of watching only media content from professional media companies,” Mott Capital said.

Other smart money investors are also bullish on Netflix, Inc. (NASDAQ:NFLX), as the number of funds from our database long the stock advanced by six to 61 during the fourth quarter. These funds held 11.70% of the company’s outstanding stock heading into 2017.

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NXP Semiconductors NV (NASDAQ:NXPI)‘s stock gained over 16% during 2016, as the company had been first rumored to be in talks about a possible acquisition by Qualcomm, with a transaction being officially announced last quarter. Mott Capital pointed out that NXP Semiconductors NV (NASDAQ:NXPI)’s stock is trading at a discount to offer price due to investors expecting some regulatory risks, and factor in the period of time during which the deal is expected to be completed. However, the investor is confident that the deal will be closed and they will get their $110 per share. A total of 80 funds tracked by us held some $7.48 billion worth of NXP Semiconductors NV (NASDAQ:NXPI)’s stock at the end of 2016, up from 78 funds with stakes valued at $2.62 billion a quarter earlier.

On the next page, we are going to take a closer look at some of Mott Capital’s losers from last year.

As stated earlier, Alkermes Plc (NASDAQ:ALKS) was one of Mott Capital’s top winners in the fourth quarter, as the stock gained over 18%. However, this growth only offset the stock’s full-year losses, which still amounted to nearly 30%. The company’s shares lost ground due to investors’ concern about drug pricing, which affected the entire biotech industry. Nevertheless, Mott Capital is still bullish on Alkermes Plc (NASDAQ:ALKS), which has been showing strong revenue growth of Vivitrol, its opioid addiction treatment.

“I have very high hopes for Vivitrol, as there are only two other medications on the market to treat Opioid Addiction, Methadone, and Suboxone. Vivitrol offers some key benefits, the most obvious is that it is a monthly injectable. Methadone and Suboxone are medications that need to be taken daily. Vivitrol has a minuscule market share, and I expect for that share only to grow as rehab center become more educated on the benefits of Vivitrol,” the fund said.

There were 24 funds in our database that amassed around 9.20% of Alkermes Plc (NASDAQ:ALKS)’s outstanding stock at the end of 2016, up from 22 funds a quarter earlier.

Vodafone Group Plc (ADR) (NASDAQ:VOD) is another loser from Mott Capital’s portfolio, as its stock dropped by over 24% last year. Mott Capital blamed the decline of the stock on the weak performance of the British Pound, as Vodafone’s stock on the London Stock Exchange declined by only 10%. However, Mott Capital thinks that the short-term currency headwinds “should turn to tailwinds” as Vodafone Group Plc (ADR) (NASDAQ:VOD) and other British companies should benefit from weaker Pound and Euro rates as the cost of their goods and services will become less expensive to foreign buyers. During the fourth quarter, the number of funds from our database long Vodafone Group Plc (ADR) (NASDAQ:VOD) inched down by one to 17.

Mott Capital closed its position in Hain Celestial Group Inc (NASDAQ:HAIN), as the stock gained 10% during the fourth quarter. The fund said that it was concerned about the company that was investigated for accounting fraud. Even though the audit committee dismissed the allegations, the fund liquidated the position before that announcement. Mott added that it had not found a replacement for Hain Celestial Group Inc (NASDAQ:HAIN), as it chose to remain cautious regarding the promises made by the Trump administration. The number of funds from our database bullish on Hain Celestial Group Inc (NASDAQ:HAIN) declined by four to 28 during the last three months of 2016.

Disclosure: none