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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Alkermes Plc (NASDAQ:ALKS) and determine whether the smart money was really smart about this stock.
Alkermes Plc (NASDAQ:ALKS) has seen a decrease in enthusiasm from smart money lately. Alkermes Plc (NASDAQ:ALKS) was in 26 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 34. There were 30 hedge funds in our database with ALKS positions at the end of the first quarter. Our calculations also showed that ALKS isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Alex Denner of Sarissa Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 to get excerpts of these letters in your inbox. Now we're going to take a gander at the fresh hedge fund action encompassing Alkermes Plc (NASDAQ:ALKS).
What does smart money think about Alkermes Plc (NASDAQ:ALKS)?
At Q2's end, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ALKS over the last 20 quarters. So, let's review 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 $151.8 million worth of stock at the end of September. It was followed by Camber Capital Management with a $140.7 million position. Other investors bullish on the company included Renaissance Technologies, Point72 Asset Management, 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 16.89% of its 13F portfolio. Camber Capital Management is also relatively very bullish on the stock, earmarking 8.05 percent of its 13F equity portfolio to ALKS.
Because Alkermes Plc (NASDAQ:ALKS) has experienced falling interest from the smart money, it's easy to see that there lies a certain "tier" of funds who sold off their positions entirely in the second quarter. Interestingly, Lee Ainslie's Maverick Capital dropped the biggest investment of the 750 funds tracked by Insider Monkey, totaling an estimated $36 million in stock. Michael Castor's fund, Sio Capital, also dumped its stock, about $2.5 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 4 funds in the second 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 Gildan Activewear Inc (NYSE:GIL), Aaron's, Inc. (NYSE:AAN), Balchem Corporation (NASDAQ:BCPC), TechnipFMC plc (NYSE:FTI), PNM Resources, Inc. (NYSE:PNM), Ardagh Group S.A. (NYSE:ARD), and Axsome Therapeutics, Inc. (NASDAQ:AXSM). This group of stocks' market values are similar to ALKS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GIL,22,432391,0 AAN,27,334862,2 BCPC,17,77576,4 FTI,31,528796,2 PNM,25,359323,3 ARD,7,53702,-1 AXSM,31,552366,7 Average,22.9,334145,2.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.9 hedge funds with bullish positions and the average amount invested in these stocks was $334 million. That figure was $703 million in ALKS's case. TechnipFMC plc (NYSE:FTI) is the most popular stock in this table. On the other hand Ardagh Group S.A. (NYSE:ARD) is the least popular one with only 7 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. Our overall hedge fund sentiment score for ALKS is 63.5. 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. 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 21.3% in 2020 through September 25th and beat the market by 17.7 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 -13.8% 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.