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Alamo Group, Inc. (ALG): Hedge Funds Are Nibbling

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Alamo Group, Inc. (NYSE:ALG) based on that data.

Is Alamo Group, Inc. (NYSE:ALG) worth your attention right now? Investors who are in the know are becoming more confident. The number of long hedge fund bets improved by 1 lately. Our calculations also showed that ALG 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). ALG was in 8 hedge funds’ portfolios at the end of the first quarter of 2020. There were 7 hedge funds in our database with ALG holdings at the end of the previous quarter.

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

In today’s marketplace there are plenty of methods shareholders use to grade publicly traded companies. Some of the most useful methods are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the top picks of the elite money managers can trounce the market by a very impressive amount (see the details here).

Martin Whitman Third Avenue Management Marty Whitman

Martin Whitman of Third Avenue Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to check out the new hedge fund action regarding Alamo Group, Inc. (NYSE:ALG).

What have hedge funds been doing with Alamo Group, Inc. (NYSE:ALG)?

At Q1’s end, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from the previous quarter. On the other hand, there were a total of 10 hedge funds with a bullish position in ALG a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, James A. Star’s Longview Asset Management has the most valuable position in Alamo Group, Inc. (NYSE:ALG), worth close to $120.9 million, accounting for 2.7% of its total 13F portfolio. Coming in second is Martin Whitman of Third Avenue Management, with a $4.1 million position; 0.6% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism comprise Chuck Royce’s Royce & Associates, Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Longview Asset Management allocated the biggest weight to Alamo Group, Inc. (NYSE:ALG), around 2.7% of its 13F portfolio. Third Avenue Management is also relatively very bullish on the stock, earmarking 0.61 percent of its 13F equity portfolio to ALG.

With a general bullishness amongst the heavyweights, specific money managers have jumped into Alamo Group, Inc. (NYSE:ALG) headfirst. Citadel Investment Group, managed by Ken Griffin, established the biggest position in Alamo Group, Inc. (NYSE:ALG). Citadel Investment Group had $1.6 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $0.6 million position during the quarter. The only other fund with a new position in the stock is Matthew Hulsizer’s PEAK6 Capital Management.

Let’s go over hedge fund activity in other stocks similar to Alamo Group, Inc. (NYSE:ALG). We will take a look at ShockWave Medical, Inc. (NASDAQ:SWAV), Futu Holdings Limited (NASDAQ:FUTU), Two Harbors Investment Corp (NYSE:TWO), and Cedar Fair, L.P. (NYSE:FUN). This group of stocks’ market values are closest to ALG’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SWAV 10 70180 -5
FUTU 3 452 0
TWO 24 32472 4
FUN 10 29631 1
Average 11.75 33184 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $33 million. That figure was $132 million in ALG’s case. Two Harbors Investment Corp (NYSE:TWO) is the most popular stock in this table. On the other hand Futu Holdings Limited (NASDAQ:FUTU) is the least popular one with only 3 bullish hedge fund positions. Alamo Group, Inc. (NYSE:ALG) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 12.2% in 2020 through June 17th and surpassed the market by 14.8 percentage points. Unfortunately ALG wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); ALG investors were disappointed as the stock returned 15.6% during the second quarter 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 most of these stocks already outperformed the market in 2020.

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