Hedge Funds Are Selling Alkermes Plc (ALKS)

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 the 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.

Is Alkermes Plc (NASDAQ:ALKS) an attractive investment now? Investors who are in the know were taking a bearish view. The number of long hedge fund positions went down by 1 in recent months. Alkermes Plc (NASDAQ:ALKS) was in 35 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 36. Our calculations also showed that ALKS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 36 hedge funds in our database with ALKS holdings at the end of June.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Keeping this in mind we’re going to take a look at the latest hedge fund action regarding Alkermes Plc (NASDAQ:ALKS).

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

At the end of September, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from one quarter earlier. By comparison, 28 hedge funds held shares or bullish call options in ALKS a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Sarissa Capital Management, managed by Alex Denner, holds the most valuable position in Alkermes Plc (NASDAQ:ALKS). Sarissa Capital Management has a $407.5 million position in the stock, comprising 32% of its 13F portfolio. The second largest stake is held by Renaissance Technologies, with a $146.3 million position; 0.2% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions consist of Stephen DuBois’s Camber Capital Management, Brandon Haley’s Holocene Advisors and Steven Boyd’s Armistice Capital. In terms of the portfolio weights assigned to each position Sarissa Capital Management allocated the biggest weight to Alkermes Plc (NASDAQ:ALKS), around 31.99% of its 13F portfolio. Healthcare Value Capital is also relatively very bullish on the stock, setting aside 6.09 percent of its 13F equity portfolio to ALKS.

Since Alkermes Plc (NASDAQ:ALKS) has faced falling interest from hedge fund managers, it’s easy to see that there was a specific group of hedge funds that decided to sell off their entire stakes last quarter. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dumped the biggest position of all the hedgies watched by Insider Monkey, totaling about $37.8 million in call options. Brandon Haley’s fund, Holocene Advisors, also sold off its call options, about $12 million worth. These transactions are important to note, as total hedge fund interest fell by 1 funds last quarter.

Let’s go over 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 Antero Midstream Corp (NYSE:AM), LHC Group, Inc. (NASDAQ:LHCG), ICU Medical, Inc. (NASDAQ:ICUI), AllianceBernstein Holding LP (NYSE:AB), Kodiak Sciences Inc (NASDAQ:KOD), Webster Financial Corporation (NYSE:WBS), and Science Applications International Corp (NYSE:SAIC). This group of stocks’ market values are similar to ALKS’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.4 hedge funds with bullish positions and the average amount invested in these stocks was $400 million. That figure was $978 million in ALKS’s case. ICU Medical, Inc. (NASDAQ:ICUI) is the most popular stock in this table. On the other hand AllianceBernstein Holding LP (NYSE:AB) 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 83.2. 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 gained 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Unfortunately ALKS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ALKS were disappointed as the stock returned -28.9% since the end of the third quarter (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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

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