Here is What Hedge Funds Think About Allegheny Technologies Incorporated (ATI)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Allegheny Technologies Incorporated (NYSE:ATI) and determine whether the smart money was really smart about this stock.

Is Allegheny Technologies Incorporated (NYSE:ATI) the right investment to pursue these days? Money managers were buying. The number of bullish hedge fund bets increased by 1 recently. Allegheny Technologies Incorporated (NYSE:ATI) was in 27 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 28. Our calculations also showed that ATI 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world 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. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now let’s view the latest hedge fund action surrounding Allegheny Technologies Incorporated (NYSE:ATI).

What does smart money think about Allegheny Technologies Incorporated (NYSE:ATI)?

At Q2’s end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from the first quarter of 2020. By comparison, 21 hedge funds held shares or bullish call options in ATI 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 Insider Monkey’s hedge fund database, D E Shaw, managed by D. E. Shaw, holds the number one position in Allegheny Technologies Incorporated (NYSE:ATI). D E Shaw has a $39.6 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Fisher Asset Management, managed by Ken Fisher, which holds a $27.6 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism include Israel Englander’s Millennium Management, Gilchrist Berg’s Water Street Capital and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Mountaineer Partners Management allocated the biggest weight to Allegheny Technologies Incorporated (NYSE:ATI), around 4.52% of its 13F portfolio. Water Street Capital is also relatively very bullish on the stock, dishing out 1.18 percent of its 13F equity portfolio to ATI.

With a general bullishness amongst the heavyweights, key money managers have jumped into Allegheny Technologies Incorporated (NYSE:ATI) headfirst. AQR Capital Management, managed by Cliff Asness, created the biggest position in Allegheny Technologies Incorporated (NYSE:ATI). AQR Capital Management had $9.4 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $7.9 million position during the quarter. The other funds with new positions in the stock are David Costen Haley’s HBK Investments, Noam Gottesman’s GLG Partners, and Highbridge Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Allegheny Technologies Incorporated (NYSE:ATI) but similarly valued. We will take a look at Dycom Industries, Inc. (NYSE:DY), Repay Holdings Corporation (NASDAQ:RPAY), Oi SA (NYSE:OIBR), 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS), MAG Silver Corporation (NYSE:MAG), Delek US Holdings, Inc. (NYSE:DK), and Red Rock Resorts, Inc. (NASDAQ:RRR). This group of stocks’ market caps are similar to ATI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DY 16 55893 -1
RPAY 18 173509 10
OIBR 7 98587 -1
FLWS 23 98838 4
MAG 10 85741 2
DK 20 235338 4
RRR 30 243581 5
Average 17.7 141641 3.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.7 hedge funds with bullish positions and the average amount invested in these stocks was $142 million. That figure was $150 million in ATI’s case. Red Rock Resorts, Inc. (NASDAQ:RRR) is the most popular stock in this table. On the other hand Oi SA (NYSE:OIBR) is the least popular one with only 7 bullish hedge fund positions. Allegheny Technologies Incorporated (NYSE:ATI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ATI is 78.4. 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 21.3% in 2020 through September 25th and beat the market by 17.7 percentage points. Unfortunately ATI wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ATI were disappointed as the stock returned -8.1% 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.