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Is Ames National Corporation (ATLO) A Good Buy According To Hedge Funds?

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Ames National Corporation (NASDAQ:ATLO) based on that data.

Is Ames National Corporation (NASDAQ:ATLO) a marvelous investment today? Investors who are in the know are becoming more confident. The number of long hedge fund positions improved by 1 recently. Our calculations also showed that ATLO isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). ATLO was in 4 hedge funds’ portfolios at the end of March. There were 3 hedge funds in our database with ATLO positions at the end of the previous quarter.

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 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 44 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.

Chuck Royce

Chuck Royce of Royce & Associates

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to view the fresh hedge fund action encompassing Ames National Corporation (NASDAQ:ATLO).

How are hedge funds trading Ames National Corporation (NASDAQ:ATLO)?

Heading into the second quarter of 2020, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from one quarter earlier. By comparison, 3 hedge funds held shares or bullish call options in ATLO a year ago. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Chuck Royce’s Royce & Associates has the most valuable position in Ames National Corporation (NASDAQ:ATLO), worth close to $9.9 million, accounting for 0.1% of its total 13F portfolio. Coming in second is Alexander Medina Seaver of Stadium Capital Management, with a $3.4 million position; the fund has 1.9% of its 13F portfolio invested in the stock. Other peers that are bullish include Renaissance Technologies, Israel Englander’s Millennium Management and . In terms of the portfolio weights assigned to each position Stadium Capital Management allocated the biggest weight to Ames National Corporation (NASDAQ:ATLO), around 1.93% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, setting aside 0.14 percent of its 13F equity portfolio to ATLO.

Now, specific money managers have jumped into Ames National Corporation (NASDAQ:ATLO) headfirst. Millennium Management, managed by Israel Englander, assembled the largest position in Ames National Corporation (NASDAQ:ATLO). Millennium Management had $0.3 million invested in the company at the end of the quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Ames National Corporation (NASDAQ:ATLO) but similarly valued. These stocks are BCB Bancorp, Inc. (NASDAQ:BCBP), Arlo Technologies, Inc. (NYSE:ARLO), Kaleido BioSciences, Inc. (NASDAQ:KLDO), and Spirit of Texas Bancshares, Inc. (NASDAQ:STXB). This group of stocks’ market caps are similar to ATLO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BCBP 6 17574 0
ARLO 10 15415 1
KLDO 3 5030 1
STXB 4 9654 0
Average 5.75 11918 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.75 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $17 million in ATLO’s case. Arlo Technologies, Inc. (NYSE:ARLO) is the most popular stock in this table. On the other hand Kaleido BioSciences, Inc. (NASDAQ:KLDO) is the least popular one with only 3 bullish hedge fund positions. Ames National Corporation (NASDAQ:ATLO) is not the least popular stock in this group but hedge fund interest is still below average. 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 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 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately ATLO wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); ATLO investors were disappointed as the stock returned -0.6% during the second quarter 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 most of these stocks already outperformed the market in 2020.

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