Is Allison Transmission Holdings Inc (NYSE:ALSN) undervalued? The best stock pickers are in a bearish mood. The number of long hedge fund bets stayed the same which is a slightly negative development in our experience
To the average investor, there are many indicators market participants can use to watch Mr. Market. Two of the most under-the-radar are hedge fund and insider trading sentiment. At Insider Monkey, our studies have shown that, historically, those who follow the top picks of the top investment managers can beat their index-focused peers by a healthy amount (see just how much).
Equally as integral, positive insider trading sentiment is another way to break down the stock market universe. As the old adage goes: there are a variety of stimuli for an executive to sell shares of his or her company, but just one, very clear reason why they would buy. Many academic studies have demonstrated the valuable potential of this tactic if piggybackers know what to do (learn more here).
With these “truths” under our belt, let’s take a look at the latest action surrounding Allison Transmission Holdings Inc (NYSE:ALSN).
What have hedge funds been doing with Allison Transmission Holdings Inc (NYSE:ALSN)?
At the end of the fourth quarter, a total of 7 of the hedge funds we track were bullish in this stock, a change of 0% from the third quarter. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their holdings substantially.
According to our comprehensive database, James Crichton and Adam Weiss’s Scout Capital Management had the most valuable position in Allison Transmission Holdings Inc (NYSE:ALSN), worth close to $109.4 million, comprising 1.9% of its total 13F portfolio. The second largest stake is held by Charles Clough of Clough Capital Partners, with a $24.7 million position; 0.8% of its 13F portfolio is allocated to the stock. Other hedge funds that hold long positions include Bill Miller’s Legg Mason Capital Management, Robert Pohly’s Samlyn Capital and D. E. Shaw’s D E Shaw.
Seeing as Allison Transmission Holdings Inc (NYSE:ALSN) has experienced falling interest from hedge fund managers, it’s easy to see that there is a sect of hedgies that decided to sell off their positions entirely in Q4. Intriguingly, Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital dumped the largest stake of the 450+ funds we monitor, worth an estimated $10.9 million in stock., and Matthew Halbower of Pentwater Capital Management was right behind this move, as the fund said goodbye to about $5.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
What have insiders been doing with Allison Transmission Holdings Inc (NYSE:ALSN)?
Insider buying is most useful when the primary stock in question has seen transactions within the past half-year. Over the latest six-month time period, Allison Transmission Holdings Inc (NYSE:ALSN) has seen zero unique insiders purchasing, and 11 insider sales (see the details of insider trades here).
Let’s also examine hedge fund and insider activity in other stocks similar to Allison Transmission Holdings Inc (NYSE:ALSN). These stocks are Visteon Corp (NYSE:VC), TRW Automotive Holdings Corp. (NYSE:TRW), LKQ Corporation (NASDAQ:LKQ), Lear Corporation (NYSE:LEA), and WABCO Holdings Inc. (NYSE:WBC). All of these stocks are in the auto parts industry and their market caps match ALSN’s market cap.
|Company Name||# of Hedge Funds||# of Insiders Buying||# of Insiders Selling|
|Visteon Corp (NYSE:VC)||39||3||4|
|TRW Automotive Holdings Corp. (NYSE:TRW)||23||0||8|
|LKQ Corporation (NASDAQ:LKQ)||14||1||7|
|Lear Corporation (NYSE:LEA)||37||0||6|
|WABCO Holdings Inc. (NYSE:WBC)||30||0||7|
With the returns demonstrated by Insider Monkey’s time-tested strategies, retail investors must always monitor hedge fund and insider trading activity, and Allison Transmission Holdings Inc (NYSE:ALSN) is no exception.