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Hedge Funds Have Never Been This Bullish On ALLETE Inc (ALE)

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 750 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is ALLETE Inc (NYSE:ALE), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

ALLETE Inc (NYSE:ALE) has experienced an increase in activity from the world’s largest hedge funds of late. ALE was in 24 hedge funds’ portfolios at the end of June. There were 18 hedge funds in our database with ALE positions at the end of the previous quarter. Our calculations also showed that ALE isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most investors, hedge funds are assumed to be unimportant, old investment vehicles of yesteryear. While there are over 8000 funds in operation at the moment, Our researchers hone in on the upper echelon of this club, approximately 750 funds. Most estimates calculate that this group of people administer the lion’s share of the hedge fund industry’s total asset base, and by observing their unrivaled stock picks, Insider Monkey has discovered numerous investment strategies that have historically beaten the S&P 500 index. Insider Monkey’s flagship hedge fund strategy outrun the S&P 500 index by around 5 percentage points a year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .

Bruce Kovner, Caxton Associates LP

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s go over the recent hedge fund action regarding ALLETE Inc (NYSE:ALE).

How are hedge funds trading ALLETE Inc (NYSE:ALE)?

At the end of the second quarter, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from one quarter earlier. On the other hand, there were a total of 15 hedge funds with a bullish position in ALE a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

ALE_oct2019

Among these funds, Renaissance Technologies held the most valuable stake in ALLETE Inc (NYSE:ALE), which was worth $91.1 million at the end of the second quarter. On the second spot was Polaris Capital Management which amassed $52.3 million worth of shares. Moreover, AQR Capital Management, GLG Partners, and Shelter Harbor Advisors were also bullish on ALLETE Inc (NYSE:ALE), allocating a large percentage of their portfolios to this stock.

As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Shelter Harbor Advisors, managed by Peter J. Hark, assembled the most outsized position in ALLETE Inc (NYSE:ALE). Shelter Harbor Advisors had $12.5 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also made a $1.2 million investment in the stock during the quarter. The following funds were also among the new ALE investors: Daniel Arbess’s Perella Weinberg Partners, John Overdeck and David Siegel’s Two Sigma Advisors, and Bruce Kovner’s Caxton Associates LP.

Let’s go over hedge fund activity in other stocks similar to ALLETE Inc (NYSE:ALE). We will take a look at Eastgroup Properties Inc (NYSE:EGP), Alcoa Corporation (NYSE:AA), Pluralsight, Inc. (NASDAQ:PS), and Ingevity Corporation (NYSE:NGVT). This group of stocks’ market valuations are similar to ALE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EGP 12 83709 5
AA 26 411683 -8
PS 20 212354 -10
NGVT 21 217334 -2
Average 19.75 231270 -3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $231 million. That figure was $261 million in ALE’s case. Alcoa Corporation (NYSE:AA) is the most popular stock in this table. On the other hand Eastgroup Properties Inc (NYSE:EGP) is the least popular one with only 12 bullish hedge fund positions. ALLETE Inc (NYSE:ALE) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on ALE, though not to the same extent, as the stock returned 5.8% during the third quarter and outperformed the market as well.

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

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