Hedge Funds Are Betting On Alleghany Corporation (Y)

Is Alleghany Corporation (NYSE:Y) 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, expert networks, and get tips from industry insiders. They fail miserably sometimes but historically their consensus stock picks outperformed the market after adjusting for known risk factors.

Is Alleghany Corporation (NYSE:Y) a buy right now? The best stock pickers are categorically getting more bullish. The number of long hedge fund bets experienced an increase of 2 lately. Y was in 24 hedge funds’ portfolios at the end of September. There were 22 hedge funds in our database with Y holdings at the end of the previous quarter. At the end of this article we will also compare Y to other stocks including Regency Centers Corp (NYSE:REG), ANSYS, Inc. (NASDAQ:ANSS), and Plains GP Holdings LP (NYSE:PAGP) to get a better sense of its popularity.

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What does the smart money think about Alleghany Corporation (NYSE:Y)?

At Q3’s end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a gain of 9% from the previous quarter. The graph below displays the number of hedge funds with bullish position in Y over the last 5 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Royce & Associates, led by Chuck Royce, holds the number one position in Alleghany Corporation (NYSE:Y). Royce & Associates has a $96.1 million position in the stock. The second most bullish fund manager is First Pacific Advisors LLC, led by Robert Rodriguez and Steven Romick, which holds a $88.1 million position. Some other professional money managers with similar optimism include Martin Whitman’s Third Avenue Management, Cliff Asness’ AQR Capital Management and John Osterweis’ Osterweis Capital Management. 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.

With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Cove Street Capital, led by Jeffrey Bronchick, assembled the largest position in Alleghany Corporation (NYSE:Y). Cove Street Capital had $6.4 million invested in the company at the end of the quarter. Mike Vranos’ Ellington also made a $0.8 million investment in the stock during the quarter. The other funds with new positions in the stock are David Costen Haley’s HBK Investments, Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital, and George Hall’s Clinton Group.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Alleghany Corporation (NYSE:Y) but similarly valued. We will take a look at Regency Centers Corp (NYSE:REG), ANSYS, Inc. (NASDAQ:ANSS), Plains GP Holdings LP (NYSE:PAGP), and Rite Aid Corporation (NYSE:RAD). All of these stocks’ market caps match Y’s market cap.

As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $637 million. That figure was $407 million in Y’s case. Rite Aid Corporation (NYSE:RAD) is the most popular stock in this table. On the other hand Regency Centers Corp (NYSE:REG) is the least popular one with only 11 bullish hedge fund positions. Alleghany Corporation (NYSE:Y) 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. In this regard RAD might be a better candidate to consider taking a long position in.

Disclosure: None