Is ALKS Stock A Buy or Sell?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Alkermes Plc (NASDAQ:ALKS).

Is ALKS stock a buy? Alkermes Plc (NASDAQ:ALKS) shareholders have witnessed an increase in hedge fund sentiment in recent months. Alkermes Plc (NASDAQ:ALKS) was in 30 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 34. Our calculations also showed that ALKS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

Alex Denner of Sarissa Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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 website. With all of this in mind we’re going to view the new hedge fund action encompassing Alkermes Plc (NASDAQ:ALKS).

Do Hedge Funds Think ALKS Is A Good Stock To Buy Now?

At fourth quarter’s end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ALKS over the last 22 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Alkermes Plc (NASDAQ:ALKS) was held by Sarissa Capital Management, which reported holding $158.6 million worth of stock at the end of December. It was followed by Renaissance Technologies with a $138.8 million position. Other investors bullish on the company included Camber Capital Management, Armistice Capital, and Woodline Partners. In terms of the portfolio weights assigned to each position Sarissa Capital Management allocated the biggest weight to Alkermes Plc (NASDAQ:ALKS), around 16.19% of its 13F portfolio. Camber Capital Management is also relatively very bullish on the stock, setting aside 4.73 percent of its 13F equity portfolio to ALKS.

As aggregate interest increased, some big names have jumped into Alkermes Plc (NASDAQ:ALKS) headfirst. Schonfeld Strategic Advisors, managed by Ryan Tolkin (CIO), created the biggest position in Alkermes Plc (NASDAQ:ALKS). Schonfeld Strategic Advisors had $5.3 million invested in the company at the end of the quarter. Palo Alto Investors also initiated a $3 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace LLP, Lee Ainslie’s Maverick Capital, and Renee Yao’s Neo Ivy Capital.

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 Sogou Inc. (NYSE:SOGO), M.D.C. Holdings, Inc. (NYSE:MDC), Casella Waste Systems Inc. (NASDAQ:CWST), Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL), Prelude Therapeutics Incorporated (NASDAQ:PRLD), Ingevity Corporation (NYSE:NGVT), and Sensient Technologies Corporation (NYSE:SXT). This group of stocks’ market caps are closest to ALKS’s market cap.

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As you can see these stocks had an average of 18.4 hedge funds with bullish positions and the average amount invested in these stocks was $410 million. That figure was $679 million in ALKS’s case. Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) is the most popular stock in this table. On the other hand Prelude Therapeutics Incorporated (NASDAQ:PRLD) is the least popular one with only 8 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 83.5. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and still beat the market by 1.5 percentage points. Unfortunately ALKS wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on ALKS were disappointed as the stock returned -5.9% since the end of the fourth quarter (through 4/12) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

Disclosure: None. This article was originally published at Insider Monkey.