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Hedge Funds Have Never Been More Bullish On Alteryx (AYX)

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Alteryx, Inc. (NYSE:AYX) at the end of the second quarter and determine whether the smart money was really smart about this stock.

Alteryx, Inc. (NYSE:AYX) has seen an increase in enthusiasm from smart money in recent months. Alteryx, Inc. (NYSE:AYX) was in 48 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 48. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that AYX isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Blair Levinsky of Waratah Capital Advisors

Blair Levinsky of Waratah Capital Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind we’re going to review the recent hedge fund action regarding Alteryx, Inc. (NYSE:AYX).

How are hedge funds trading Alteryx, Inc. (NYSE:AYX)?

At second quarter’s end, a total of 48 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from the first quarter of 2020. By comparison, 38 hedge funds held shares or bullish call options in AYX a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Colin Moran’s Abdiel Capital Advisors has the most valuable position in Alteryx, Inc. (NYSE:AYX), worth close to $392.9 million, accounting for 11.6% of its total 13F portfolio. On Abdiel Capital Advisors’s heels is Bares Capital Management, managed by Brian Bares, which holds a $267.3 million position; 6.6% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions include Panayotis Takis Sparaggis’s Alkeon Capital Management, Alex Sacerdote’s Whale Rock Capital Management and Brian Ashford-Russell and Tim Woolley’s Polar Capital. In terms of the portfolio weights assigned to each position Abdiel Capital Advisors allocated the biggest weight to Alteryx, Inc. (NYSE:AYX), around 11.61% of its 13F portfolio. Bares Capital Management is also relatively very bullish on the stock, dishing out 6.6 percent of its 13F equity portfolio to AYX.

Consequently, key hedge funds were leading the bulls’ herd. Point72 Asset Management, managed by Steve Cohen, established the most valuable position in Alteryx, Inc. (NYSE:AYX). Point72 Asset Management had $62.6 million invested in the company at the end of the quarter. Nancy Zevenbergen’s Zevenbergen Capital Investments also made a $41.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors, Seth Wunder’s Black-and-White Capital, and Phill Gross and Robert Atchinson’s Adage Capital Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Alteryx, Inc. (NYSE:AYX) but similarly valued. These stocks are Gartner Inc (NYSE:IT), Trimble Inc. (NASDAQ:TRMB), VICI Properties Inc. (NYSE:VICI), Citizens Financial Group Inc (NYSE:CFG), StoneCo Ltd. (NASDAQ:STNE), United Rentals, Inc. (NYSE:URI), and Booz Allen Hamilton Holding Corporation (NYSE:BAH). This group of stocks’ market values are closest to AYX’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IT 32 1302132 0
TRMB 26 979865 6
VICI 51 1573468 15
CFG 47 841328 1
STNE 35 1342781 1
URI 40 889794 -3
BAH 25 219237 -2
Average 36.6 1021229 2.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.6 hedge funds with bullish positions and the average amount invested in these stocks was $1021 million. That figure was $1613 million in AYX’s case. VICI Properties Inc. (NYSE:VICI) is the most popular stock in this table. On the other hand Booz Allen Hamilton Holding Corporation (NYSE:BAH) is the least popular one with only 25 bullish hedge fund positions. Alteryx, Inc. (NYSE:AYX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AYX is 84.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately AYX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on AYX were disappointed as the stock returned -26.4% 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.

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