The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtAllot Ltd. (NASDAQ:ALLT) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.
Allot Ltd. (NASDAQ:ALLT) was in 13 hedge funds’ portfolios at the end of the first quarter of 2020. ALLT investors should be aware of an increase in hedge fund sentiment in recent months. There were 10 hedge funds in our database with ALLT holdings at the end of the previous quarter. Our calculations also showed that ALLT 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 financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 13 largest cobalt producing countries to identify emerging trends that are likely to lead to 1000% gains in the coming years. 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 view the recent hedge fund action regarding Allot Ltd. (NASDAQ:ALLT).
What does smart money think about Allot Ltd. (NASDAQ:ALLT)?
At Q1’s end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 30% from the fourth quarter of 2019. By comparison, 10 hedge funds held shares or bullish call options in ALLT a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Among these funds, Lynrock Lake held the most valuable stake in Allot Ltd. (NASDAQ:ALLT), which was worth $62 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $18.9 million worth of shares. Sphera Global Healthcare Fund, Rima Senvest Management, and P.A.W. CAPITAL PARTNERS were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Lynrock Lake allocated the biggest weight to Allot Ltd. (NASDAQ:ALLT), around 6.11% of its 13F portfolio. P.A.W. CAPITAL PARTNERS is also relatively very bullish on the stock, designating 4.77 percent of its 13F equity portfolio to ALLT.
As industrywide interest jumped, key money managers have been driving this bullishness. Sphera Global Healthcare Fund, managed by Doron Breen and Mori Arkin, initiated the most outsized position in Allot Ltd. (NASDAQ:ALLT). Sphera Global Healthcare Fund had $8.7 million invested in the company at the end of the quarter. Josh Goldberg’s G2 Investment Partners Management also made a $3.5 million investment in the stock during the quarter. The other funds with brand new ALLT positions are Paul Marshall and Ian Wace’s Marshall Wace LLP and Greg Eisner’s Engineers Gate Manager.
Let’s now review hedge fund activity in other stocks similar to Allot Ltd. (NASDAQ:ALLT). We will take a look at Consolidated Communications Holdings Inc (NASDAQ:CNSL), Camtek LTD. (NASDAQ:CAMT), WAVE Life Sciences Ltd. (NASDAQ:WVE), and Century Aluminum Co (NASDAQ:CENX). This group of stocks’ market valuations are similar to ALLT’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $107 million in ALLT’s case. Consolidated Communications Holdings Inc (NASDAQ:CNSL) is the most popular stock in this table. On the other hand Camtek LTD. (NASDAQ:CAMT) is the least popular one with only 6 bullish hedge fund positions. Allot Ltd. (NASDAQ:ALLT) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 13.3% in 2020 through June 25th but beat the market by 16.8 percentage points. Unfortunately ALLT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ALLT were disappointed as the stock returned 13.4% during the same time period 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.