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Should You Avoid Alkermes Plc (ALKS)?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Alkermes Plc (NASDAQ:ALKS).

Alkermes Plc (NASDAQ:ALKS) investors should be aware of a decrease in hedge fund interest in recent months. ALKS was in 30 hedge funds’ portfolios at the end of March. There were 33 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 Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In today’s marketplace there are a multitude of formulas investors can use to analyze publicly traded companies. Some of the most useful formulas are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the best picks of the best hedge fund managers can beat their index-focused peers by a healthy margin (see the details here).

Michael Castor of Sio Capital

Michael Castor of Sio Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this oneWe interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the latest hedge fund action surrounding Alkermes Plc (NASDAQ:ALKS).

How have hedgies been trading Alkermes Plc (NASDAQ:ALKS)?

Heading into the second quarter of 2020, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ALKS over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Sarissa Capital Management held the most valuable stake in Alkermes Plc (NASDAQ:ALKS), which was worth $103.7 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $103.6 million worth of shares. Camber Capital Management, Maverick Capital, and AQR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Sarissa Capital Management allocated the biggest weight to Alkermes Plc (NASDAQ:ALKS), around 13.23% of its 13F portfolio. Camber Capital Management is also relatively very bullish on the stock, designating 5.21 percent of its 13F equity portfolio to ALKS.

Because Alkermes Plc (NASDAQ:ALKS) has witnessed declining sentiment from the smart money, it’s easy to see that there exists a select few hedge funds who were dropping their full holdings in the first quarter. At the top of the heap, Kevin Kotler’s Broadfin Capital cut the biggest position of the “upper crust” of funds followed by Insider Monkey, valued at close to $21.1 million in stock, and Anand Parekh’s Alyeska Investment Group was right behind this move, as the fund cut about $20.6 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 3 funds in the first quarter.

Let’s now review hedge fund activity in other stocks similar to Alkermes Plc (NASDAQ:ALKS). These stocks are Teradata Corporation (NYSE:TDC), MGE Energy, Inc. (NASDAQ:MGEE), Ra Pharmaceuticals, Inc. (NASDAQ:RARX), and Penske Automotive Group, Inc. (NYSE:PAG). This group of stocks’ market caps match ALKS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TDC 24 171880 -4
MGEE 6 38970 -3
RARX 34 890266 6
PAG 19 69005 -10
Average 20.75 292530 -2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $293 million. That figure was $509 million in ALKS’s case. Ra Pharmaceuticals, Inc. (NASDAQ:RARX) is the most popular stock in this table. On the other hand MGE Energy, Inc. (NASDAQ:MGEE) is the least popular one with only 6 bullish hedge fund positions. Alkermes Plc (NASDAQ:ALKS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately ALKS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ALKS were disappointed as the stock returned 13.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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