Michael Kramer’s Mott Capital just released its Q4 letter to investors, which discussed the fund’s trying 2016 and some of its portfolio moves during the fourth quarter of last year. The fund, which uses a “thematic growth strategy” that couples financial analysis with the latest trends to uncover potential investments, dipped by 2.10% net of fees in 2016, while the S&P 500 registered gains of 11.96%. That followed a 2015 that saw the fund post 1.52% gains net of fees, slightly topping the S&P’s 1.38% rise.
Among the stocks discussed by Mott Capital in its latest letter were Netflix, Inc. (NASDAQ:NFLX), Alkermes Plc (NASDAQ:ALKS), Walt Disney Co (NYSE:DIS), NXP Semiconductors NV (NASDAQ:NXPI), and The Hain Celestial Group, Inc. (NASDAQ:HAIN). We’ll take a look at its thoughts on those positions (or former positions) in this article and see how other hedge funds have been trading them.
If you’re interested in further reading on Netflix, check out this list of the 11 Most Successful Netflix Originals. For more from Mott Capital, be sure to check out their collection of articles over at Seeking Alpha.
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Netflix, Inc. (NASDAQ:NFLX)
Let’s start with Netflix, which is a prime example of the type of generational stock that Mott Capital seeks to invest in. The fund believes that the major paradigm shift in the video content market is still in its infancy and that Netflix is perfectly positioned to be at the forefront of this shift. Citing what it calls the “On-Demand Generation”, which watches what it wants, when it wants, Mott Capital drew a parallel to the popularity of YouTube stars and suggested that Netflix could capitalize on this trend, ostensibly by bringing more of those stars over to its platform, which the company has indeed started to do, most notably by nabbing Colleen Ballinger (AKA Miranda Sings) to create her own show on the platform. Mott also likes the fact that the company is making money. Netflix shares were owned by 55 of the hedge funds in our system on September 30.
Alkermes Plc (NASDAQ:ALKS)
Alkermes was Mott Capital’s biggest loser in 2016, sliding by 29.98%, despite Q4 gains of 18.18% thanks to positive results from its FORWARD 5 study of ALKS ‘5461. Mott Capital attributed the 2016 losses to the declining overall sentiment towards the healthcare sector, fueled by fears of government intervention on drug pricing. The fund is still bullish on the company’s opioid addiction treatment Vivitrol however, saying:
“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.”
Mott Capital calculates the drug’s current share of the market at just 1%-2%, so there’s a great deal of growth potential. 12.80% of Alkermes’ shares were owned by 22 of the hedge funds tracked by Insider Monkey on September 30.
On the next page we’ll check out three other stocks discussed by Mott Capital in its latest investor letter.