Here is What Hedge Funds Think About Allegiant Travel Company (ALGT)

In this article we will check out the progression of hedge fund sentiment towards Allegiant Travel Company (NASDAQ:ALGT) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is Allegiant Travel Company (NASDAQ:ALGT) a safe stock to buy now? The best stock pickers were becoming hopeful. The number of bullish hedge fund positions inched up by 3 in recent months. Allegiant Travel Company (NASDAQ:ALGT) was in 22 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 26. Our calculations also showed that ALGT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 19 hedge funds in our database with ALGT positions at the end of the fourth quarter.

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Paul Reeder PAR Capital Management

Paul Reeder of PAR Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we’re going to take a glance at the recent hedge fund action regarding Allegiant Travel Company (NASDAQ:ALGT).

Do Hedge Funds Think ALGT Is A Good Stock To Buy Now?

At the end of March, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 16% from one quarter earlier. By comparison, 19 hedge funds held shares or bullish call options in ALGT a year ago. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

More specifically, PAR Capital Management was the largest shareholder of Allegiant Travel Company (NASDAQ:ALGT), with a stake worth $183 million reported as of the end of March. Trailing PAR Capital Management was Diamond Hill Capital, which amassed a stake valued at $71.9 million. Citadel Investment Group, Driehaus Capital, and Royce & Associates 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 Owls Nest Partners allocated the biggest weight to Allegiant Travel Company (NASDAQ:ALGT), around 10.13% of its 13F portfolio. Mountain Lake Investment Management is also relatively very bullish on the stock, dishing out 6.66 percent of its 13F equity portfolio to ALGT.

Consequently, specific money managers were breaking ground themselves. Driehaus Capital, managed by Richard Driehaus, initiated the largest position in Allegiant Travel Company (NASDAQ:ALGT). Driehaus Capital had $19.2 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $6.7 million investment in the stock during the quarter. The following funds were also among the new ALGT investors: Peter Muller’s PDT Partners, Matthew Hulsizer’s PEAK6 Capital Management, and Michael Gelband’s ExodusPoint Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Allegiant Travel Company (NASDAQ:ALGT) but similarly valued. We will take a look at Watts Water Technologies Inc (NYSE:WTS), Itron, Inc. (NASDAQ:ITRI), SmileDirectClub, Inc. (NASDAQ:SDC), Terreno Realty Corporation (NYSE:TRNO), Taylor Morrison Home Corp (NYSE:TMHC), Six Flags Entertainment Corp (NYSE:SIX), and Mercury Systems Inc (NASDAQ:MRCY). This group of stocks’ market values are closest to ALGT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WTS 18 398034 0
ITRI 29 365455 23
SDC 21 177116 -4
TRNO 12 43004 3
TMHC 22 218154 -11
SIX 37 1036490 -4
MRCY 17 110986 7
Average 22.3 335606 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.3 hedge funds with bullish positions and the average amount invested in these stocks was $336 million. That figure was $402 million in ALGT’s case. Six Flags Entertainment Corp (NYSE:SIX) is the most popular stock in this table. On the other hand Terreno Realty Corporation (NYSE:TRNO) is the least popular one with only 12 bullish hedge fund positions. Allegiant Travel Company (NASDAQ:ALGT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ALGT is 53.4. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately ALGT wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); ALGT investors were disappointed as the stock returned -25.3% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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