In this article we will take a look at whether hedge funds think Alamo Group, Inc. (NYSE:ALG) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is ALG a good stock to buy now? Alamo Group, Inc. (NYSE:ALG) shareholders have witnessed a decrease in support from the world’s most elite money managers of late. Alamo Group, Inc. (NYSE:ALG) was in 9 hedge funds’ portfolios at the end of September. The all time high for this statistics is 15. There were 10 hedge funds in our database with ALG positions at the end of the second quarter. Our calculations also showed that ALG isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, 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 real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Keeping this in mind we’re going to take a look at the new hedge fund action surrounding Alamo Group, Inc. (NYSE:ALG).
Do Hedge Funds Think ALG Is A Good Stock To Buy Now?
At the end of September, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ALG over the last 21 quarters. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
More specifically, Longview Asset Management was the largest shareholder of Alamo Group, Inc. (NYSE:ALG), with a stake worth $147.1 million reported as of the end of September. Trailing Longview Asset Management was Third Avenue Management, which amassed a stake valued at $5 million. Marshall Wace LLP, Citadel Investment Group, 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 Longview Asset Management allocated the biggest weight to Alamo Group, Inc. (NYSE:ALG), around 3.19% of its 13F portfolio. Third Avenue Management is also relatively very bullish on the stock, setting aside 0.7 percent of its 13F equity portfolio to ALG.
Due to the fact that Alamo Group, Inc. (NYSE:ALG) has witnessed declining sentiment from the aggregate hedge fund industry, it’s easy to see that there was a specific group of money managers that slashed their full holdings heading into Q4. Interestingly, Paul Tudor Jones’s Tudor Investment Corp cut the largest position of the 750 funds watched by Insider Monkey, worth close to $0.3 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund dropped about $0.3 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks similar to Alamo Group, Inc. (NYSE:ALG). These stocks are Vasta Platform Limited (NASDAQ:VSTA), Holly Energy Partners, L.P. (NYSE:HEP), Hailiang Education Group Inc. (NASDAQ:HLG), Columbia Financial, Inc. (NASDAQ:CLBK), Aphria Inc. (NYSE:APHA), Renasant Corporation (NASDAQ:RNST), and Mersana Therapeutics, Inc. (NASDAQ:MRSN). This group of stocks’ market caps match ALG’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.9 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $165 million in ALG’s case. Mersana Therapeutics, Inc. (NASDAQ:MRSN) is the most popular stock in this table. On the other hand Hailiang Education Group Inc. (NASDAQ:HLG) is the least popular one with only 1 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 overall hedge fund sentiment score for ALG is 36.8. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on ALG as the stock returned 26.4% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.