Is ALLT A Good Stock To Buy Now?

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 September. At Insider Monkey, we follow nearly 817 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 Allot Ltd. (NASDAQ:ALLT), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is ALLT a good stock to buy now? Allot Ltd. (NASDAQ:ALLT) has seen an increase in enthusiasm from smart money of late. Allot Ltd. (NASDAQ:ALLT) was in 13 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 13. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 12 hedge funds in our database with ALLT holdings at the end of June. Our calculations also showed that ALLT 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.

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 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 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 stocks that are in our short portfolio.

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

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 let’s take a glance at the key hedge fund action encompassing Allot Ltd. (NASDAQ:ALLT).

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

At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from one quarter earlier. On the other hand, there were a total of 9 hedge funds with a bullish position in ALLT a year ago. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

Is ALLT A Good Stock To Buy?

The largest stake in Allot Ltd. (NASDAQ:ALLT) was held by Lynrock Lake, which reported holding $63.2 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $17.4 million position. Other investors bullish on the company included Rima Senvest Management, Sphera Global Healthcare Fund, and Roumell Asset Management. In terms of the portfolio weights assigned to each position Roumell Asset Management allocated the biggest weight to Allot Ltd. (NASDAQ:ALLT), around 11.69% of its 13F portfolio. Lynrock Lake is also relatively very bullish on the stock, earmarking 4.7 percent of its 13F equity portfolio to ALLT.

As one would reasonably expect, some big names were leading the bulls’ herd. Roumell Asset Management, managed by Jim Roumell, assembled the biggest position in Allot Ltd. (NASDAQ:ALLT). Roumell Asset Management had $5.9 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $0.2 million investment in the stock during the quarter. The only other fund with a new position in the stock is Matthew Hulsizer’s PEAK6 Capital Management.

Let’s also examine hedge fund activity in other stocks similar to Allot Ltd. (NASDAQ:ALLT). These stocks are Avadel Pharmaceuticals plc (NASDAQ:AVDL), First Community Bancshares Inc (NASDAQ:FCBC), Modine Manufacturing Company (NYSE:MOD), Gamco Investors Inc. (NYSE:GBL), Seneca Foods Corp. (NASDAQ:SENEB), EVI Industries Inc (NYSE:EVI), and CorePoint Lodging Inc. (NYSE:CPLG). All of these stocks’ market caps are closest to ALLT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AVDL 18 83823 -5
FCBC 3 5312 0
MOD 14 47588 -1
GBL 6 6532 -3
SENEB 2 2190 0
EVI 1 18552 -1
CPLG 10 24538 -2
Average 7.7 26934 -1.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.7 hedge funds with bullish positions and the average amount invested in these stocks was $27 million. That figure was $117 million in ALLT’s case. Avadel Pharmaceuticals plc (NASDAQ:AVDL) is the most popular stock in this table. On the other hand EVI Industries Inc (NYSE:EVI) is the least popular one with only 1 bullish hedge fund positions. Allot Ltd. (NASDAQ:ALLT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ALLT is 71.3. 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. Hedge funds were also right about betting on ALLT as the stock returned 13.5% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Follow Allot Ltd. (NASDAQ:ALLT)

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