At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Is Alamo Group, Inc. (NYSE:ALG) an attractive investment today? Hedge funds are actually in a bearish mood. The number of long hedge fund bets that are revealed through the 13F filings were cut by 2 lately. ALG was in 10 hedge funds’ portfolios at the end of September. There were 12 hedge funds in our database with ALG holdings at the end of the previous quarter. At the end of this article we will also compare ALG to other stocks including Bob Evans Farms Inc (NASDAQ:BOBE), Virtus Investment Partners Inc (NASDAQ:VRTS), and Saia Inc (NASDAQ:SAIA) to get a better sense of its popularity.
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
How are hedge funds trading Alamo Group, Inc. (NYSE:ALG)?
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, down by 17% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in ALG heading into this year. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Longview Asset Management, led by James A. Star, holds the largest position in Alamo Group, Inc. (NYSE:ALG). Longview Asset Management has a $112 million position in the stock, comprising 1.9% of its 13F portfolio. On Longview Asset Management’s heels is Chuck Royce of Royce & Associates, with a $23.4 million position. Other members of the smart money that are bullish include Martin Whitman’s Third Avenue Management, Cliff Asness’ AQR Capital Management and Peter Muller’s PDT Partners. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.