Alleghany Corporation (Y): Hedge Funds Are Nibbling

In this article we will take a look at whether hedge funds think Alleghany Corporation (NYSE:Y) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Alleghany Corporation (NYSE:Y) was in 25 hedge funds’ portfolios at the end of March. Y investors should be aware of an increase in support from the world’s most elite money managers recently. There were 24 hedge funds in our database with Y positions at the end of the previous quarter. Our calculations also showed that Y 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 the eyes of most stock holders, hedge funds are viewed as underperforming, old investment vehicles of the past. While there are greater than 8000 funds trading at present, Our researchers hone in on the elite of this club, around 850 funds. It is estimated that this group of investors oversee most of the hedge fund industry’s total asset base, and by tailing their best investments, Insider Monkey has formulated several investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Chuck Royce

Chuck Royce of Royce & Associates

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We 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. Now we’re going to review the fresh hedge fund action regarding Alleghany Corporation (NYSE:Y).

Hedge fund activity in Alleghany Corporation (NYSE:Y)

At Q1’s end, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards Y over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is Y A Good Stock To Buy?

According to Insider Monkey’s hedge fund database, Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, holds the largest position in Alleghany Corporation (NYSE:Y). Polar Capital has a $73.2 million position in the stock, comprising 0.8% of its 13F portfolio. On Polar Capital’s heels is AQR Capital Management, managed by Cliff Asness, which holds a $58.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other peers with similar optimism encompass Chuck Royce’s Royce & Associates, Daniel Johnson’s Gillson Capital and Steve Cohen’s Point72 Asset Management. In terms of the portfolio weights assigned to each position Gillson Capital allocated the biggest weight to Alleghany Corporation (NYSE:Y), around 3.51% of its 13F portfolio. Spindletop Capital is also relatively very bullish on the stock, dishing out 2.76 percent of its 13F equity portfolio to Y.

As one would reasonably expect, some big names have been driving this bullishness. Echo Street Capital Management, managed by Greg Poole, assembled the biggest position in Alleghany Corporation (NYSE:Y). Echo Street Capital Management had $3 million invested in the company at the end of the quarter. David E. Winebrenner’s Spindletop Capital also initiated a $2 million position during the quarter. The following funds were also among the new Y investors: Gregg Moskowitz’s Interval Partners, Alec Litowitz and Ross Laser’s Magnetar Capital, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s now review hedge fund activity in other stocks similar to Alleghany Corporation (NYSE:Y). We will take a look at Pool Corporation (NASDAQ:POOL), Camden Property Trust (NYSE:CPT), Expedia Group Inc (NASDAQ:EXPE), and Crown Holdings, Inc. (NYSE:CCK). This group of stocks’ market valuations match Y’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
POOL 33 362202 5
CPT 32 361736 1
EXPE 41 1550595 -18
CCK 56 1217305 -2
Average 40.5 872960 -3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 40.5 hedge funds with bullish positions and the average amount invested in these stocks was $873 million. That figure was $269 million in Y’s case. Crown Holdings, Inc. (NYSE:CCK) is the most popular stock in this table. On the other hand Camden Property Trust (NYSE:CPT) is the least popular one with only 32 bullish hedge fund positions. Compared to these stocks Alleghany Corporation (NYSE:Y) is even less popular than CPT. Hedge funds dodged a bullet by taking a bearish stance towards Y. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th but managed to beat the market by 14.2 percentage points. Unfortunately Y wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); Y investors were disappointed as the stock returned -4% during the second quarter (through June 10th) 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 so far in 2020.

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