Here’s What Hedge Funds Think About Alamo Group, Inc. (ALG)

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 have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31 holdings, data that is available nowhere else. Should you consider Alamo Group, Inc. (NYSE:ALG) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Is Alamo Group, Inc. (NYSE:ALG) a safe investment right now? Prominent investors are reducing their bets on the stock. The number of long hedge fund positions decreased by 1 lately. Our calculations also showed that alg isn’t among the 30 most popular stocks among hedge funds.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 32 percentage points since May 2014 through March 12, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

Chuck Royce

Let’s check out the new hedge fund action surrounding Alamo Group, Inc. (NYSE:ALG).

How have hedgies been trading Alamo Group, Inc. (NYSE:ALG)?

Heading into the first quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ALG over the last 14 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with ALG Positions

More specifically, Longview Asset Management was the largest shareholder of Alamo Group, Inc. (NYSE:ALG), with a stake worth $131.5 million reported as of the end of December. Trailing Longview Asset Management was Royce & Associates, which amassed a stake valued at $16.2 million. Third Avenue Management, Citadel Investment Group, and AQR Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.

Judging by the fact that Alamo Group, Inc. (NYSE:ALG) has witnessed a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there is a sect of money managers that slashed their positions entirely by the end of the third quarter. Interestingly, Joseph A. Jolson’s Harvest Capital Strategies dropped the biggest position of the 700 funds followed by Insider Monkey, comprising about $3.4 million in stock, and Jim Simons’s Renaissance Technologies was right behind this move, as the fund sold off about $0.8 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Alamo Group, Inc. (NYSE:ALG). We will take a look at TherapeuticsMD Inc (NASDAQ:TXMD), Kadant Inc. (NYSE:KAI), Inspire Medical Systems, Inc. (NYSE:INSP), and Washington Prime Group Inc. (NYSE:WPG). This group of stocks’ market caps are similar to ALG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TXMD 10 49227 -4
KAI 17 87171 3
INSP 15 177559 2
WPG 13 9064 3
Average 13.75 80755 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $81 million. That figure was $159 million in ALG’s case. Kadant Inc. (NYSE:KAI) is the most popular stock in this table. On the other hand TherapeuticsMD Inc (NASDAQ:TXMD) is the least popular one with only 10 bullish hedge fund positions. Alamo Group, Inc. (NYSE:ALG) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on ALG as the stock returned 31.2% and outperformed the market by an even larger margin.

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