Were Hedge Funds Right About Flocking Into Alarm.com Holdings, Inc. (ALRM) ?

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 at Insider Monkey have gone over 730 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 28th. In this article we look at what those investors think of Alarm.com Holdings, Inc. (NASDAQ:ALRM).

Is Alarm.com Holdings, Inc. (NASDAQ:ALRM) undervalued? The best stock pickers are betting on the stock. The number of bullish hedge fund positions inched up by 3 recently. Our calculations also showed that ALRM isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

To most shareholders, hedge funds are viewed as worthless, old financial tools of years past. While there are over 8000 funds trading at the moment, Our experts hone in on the bigwigs of this group, around 750 funds. These investment experts orchestrate the majority of all hedge funds’ total capital, and by keeping track of their highest performing investments, Insider Monkey has discovered a few investment strategies that have historically defeated the broader indices. Insider Monkey’s flagship hedge fund strategy outpaced the S&P 500 index by around 5 percentage points per annum since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .


Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a peek at the latest hedge fund action surrounding Alarm.com Holdings, Inc. (NASDAQ:ALRM).

Hedge fund activity in Alarm.com Holdings, Inc. (NASDAQ:ALRM)

Heading into the third quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ALRM over the last 16 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with ALRM Positions

Among these funds, Bares Capital Management held the most valuable stake in Alarm.com Holdings, Inc. (NASDAQ:ALRM), which was worth $78.1 million at the end of the second quarter. On the second spot was Akre Capital Management which amassed $32.1 million worth of shares. Moreover, Arrowstreet Capital, Fisher Asset Management, and Millennium Management were also bullish on Alarm.com Holdings, Inc. (NASDAQ:ALRM), allocating a large percentage of their portfolios to this stock.

As one would reasonably expect, key hedge funds have been driving this bullishness. Millennium Management, managed by Israel Englander, assembled the biggest position in Alarm.com Holdings, Inc. (NASDAQ:ALRM). Millennium Management had $13.3 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $2.4 million position during the quarter. The other funds with brand new ALRM positions are Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital, Perella Weinberg Partners, and Paul Tudor Jones’s Tudor Investment Corp.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Alarm.com Holdings, Inc. (NASDAQ:ALRM) but similarly valued. These stocks are QTS Realty Trust Inc (NYSE:QTS), iRobot Corporation (NASDAQ:IRBT), Apollo Commercial Real Estate Finance, Inc. (NYSE:ARI), and Arrowhead Pharmaceuticals, Inc. (NASDAQ:ARWR). This group of stocks’ market valuations match ALRM’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
QTS 23 357128 1
IRBT 9 57604 -6
ARI 13 68424 2
ARWR 16 240028 0
Average 15.25 180796 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $181 million. That figure was $192 million in ALRM’s case. QTS Realty Trust Inc (NYSE:QTS) is the most popular stock in this table. On the other hand iRobot Corporation (NASDAQ:IRBT) is the least popular one with only 9 bullish hedge fund positions. Alarm.com Holdings, Inc. (NASDAQ:ALRM) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ALRM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ALRM were disappointed as the stock returned -12.8% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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