Is AYX A Good Stock To Buy Now?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Alteryx, Inc. (NYSE:AYX).

Is AYX a good stock to buy now? Alteryx, Inc. (NYSE:AYX) has seen a decrease in hedge fund sentiment recently. Alteryx, Inc. (NYSE:AYX) was in 41 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 48. Our calculations also showed that AYX 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.

Alex Sacerdote of Whale Rock Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. With all of this in mind let’s review the recent hedge fund action encompassing Alteryx, Inc. (NYSE:AYX).

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

At the end of the third quarter, a total of 41 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from the second quarter of 2020. By comparison, 44 hedge funds held shares or bullish call options in AYX a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

More specifically, Bares Capital Management was the largest shareholder of Alteryx, Inc. (NYSE:AYX), with a stake worth $311.3 million reported as of the end of September. Trailing Bares Capital Management was Abdiel Capital Advisors, which amassed a stake valued at $227.5 million. Whale Rock Capital Management, Alkeon Capital Management, and Kensico Capital 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 Abdiel Capital Advisors allocated the biggest weight to Alteryx, Inc. (NYSE:AYX), around 7.15% of its 13F portfolio. Bares Capital Management is also relatively very bullish on the stock, setting aside 6.57 percent of its 13F equity portfolio to AYX.

Since Alteryx, Inc. (NYSE:AYX) has experienced a decline in interest from the smart money, logic holds that there was a specific group of hedge funds who were dropping their full holdings by the end of the third quarter. It’s worth mentioning that Brian Ashford-Russell and Tim Woolley’s Polar Capital dumped the largest investment of the “upper crust” of funds watched by Insider Monkey, totaling close to $70 million in stock. Steve Cohen’s fund, Point72 Asset Management, also dumped its stock, about $62.6 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 7 funds by the end of the third quarter.

Let’s go over hedge fund activity in other stocks similar to Alteryx, Inc. (NYSE:AYX). These stocks are F5 Networks, Inc. (NASDAQ:FFIV), JFrog Ltd. (NASDAQ:FROG), NRG Energy Inc (NYSE:NRG), RH (NYSE:RH), Sibanye Stillwater Limited (NYSE:SBSW), Alleghany Corporation (NYSE:Y), and Service Corporation International (NYSE:SCI). All of these stocks’ market caps match AYX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FFIV 36 806699 -3
FROG 22 288909 22
NRG 32 1086627 -4
RH 40 1623869 0
SBSW 22 208952 5
Y 29 306105 -2
SCI 30 727982 3
Average 30.1 721306 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.1 hedge funds with bullish positions and the average amount invested in these stocks was $721 million. That figure was $1193 million in AYX’s case. RH (NYSE:RH) is the most popular stock in this table. On the other hand JFrog Ltd. (NASDAQ:FROG) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Alteryx, Inc. (NYSE:AYX) is more popular among hedge funds. Our overall hedge fund sentiment score for AYX is 73.6. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Unfortunately AYX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AYX were disappointed as the stock returned 4.9% since the end of the third quarter (through 12/14) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 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.