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2019 Review: Top Hedge Fund Stocks vs. Alteryx, Inc. (AYX)

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned approximately 31% in 2019 (through December 23rd). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 41.1% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Alteryx, Inc. (NYSE:AYX).

Is Alteryx, Inc. (NYSE:AYX) worth your attention right now? Investors who are in the know are turning bullish. The number of long hedge fund bets rose by 6 recently. Our calculations also showed that AYX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings). AYX was in 44 hedge funds’ portfolios at the end of September. There were 38 hedge funds in our database with AYX holdings at the end of the previous quarter.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now we’re going to check out the new hedge fund action regarding Alteryx, Inc. (NYSE:AYX).

How are hedge funds trading Alteryx, Inc. (NYSE:AYX)?

Heading into the fourth quarter of 2019, a total of 44 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 16% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in AYX over the last 17 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Colin Moran’s Abdiel Capital Advisors has the biggest position in Alteryx, Inc. (NYSE:AYX), worth close to $431.2 million, comprising 26.5% of its total 13F portfolio. On Abdiel Capital Advisors’s heels is Whale Rock Capital Management, led by Alex Sacerdote, holding a $228.8 million position; the fund has 4.2% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish consist of Panayotis Takis Sparaggis’s Alkeon Capital Management, Adam Parker’s Center Lake Capital and Steve Cohen’s Point72 Asset Management. In terms of the portfolio weights assigned to each position Center Lake Capital allocated the biggest weight to Alteryx, Inc. (NYSE:AYX), around 41.87% of its 13F portfolio. Abdiel Capital Advisors is also relatively very bullish on the stock, dishing out 26.48 percent of its 13F equity portfolio to AYX.

As industrywide interest jumped, key money managers have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, initiated the most outsized call position in Alteryx, Inc. (NYSE:AYX). Point72 Asset Management had $10.7 million invested in the company at the end of the quarter. Ken Fisher’s Fisher Asset Management also made a $9.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Sander Gerber’s Hudson Bay Capital Management, Matthew Hulsizer’s PEAK6 Capital Management, and Larry Chen and Terry Zhang’s Tairen Capital.

Let’s check out hedge fund activity in other stocks similar to Alteryx, Inc. (NYSE:AYX). These stocks are Catalent Inc (NYSE:CTLT), TIM Participacoes SA (NYSE:TSU), Ceridian HCM Holding Inc. (NYSE:CDAY), and Autoliv Inc. (NYSE:ALV). This group of stocks’ market valuations are similar to AYX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CTLT 27 392969 7
TSU 13 290605 1
CDAY 28 1115679 6
ALV 14 627166 1
Average 20.5 606605 3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $607 million. That figure was $1334 million in AYX’s case. Ceridian HCM Holding Inc. (NYSE:CDAY) is the most popular stock in this table. On the other hand TIM Participacoes SA (NYSE:TSU) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Alteryx, Inc. (NYSE:AYX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on AYX as the stock returned 73% so far in 2019 (through 12/23) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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