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Were Hedge Funds Right About Piling Into Alta Equipment Group Inc. (ALTG)?

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 plowed through 821 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 March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Alta Equipment Group Inc. (NYSE:ALTG) and determine whether the smart money was really smart about this stock.

Alta Equipment Group Inc. (NYSE:ALTG) investors should pay attention to an increase in hedge fund sentiment lately. ALTG was in 20 hedge funds’ portfolios at the end of the first quarter of 2020. There were 10 hedge funds in our database with ALTG positions at the end of the previous quarter. Our calculations also showed that ALTG 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).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In today’s marketplace there are several metrics market participants use to appraise stocks. A couple of the less known metrics are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the top money managers can beat their index-focused peers by a healthy margin (see the details here).

Wil Harkey Nantahala Capital

Wil Harkey of Nantahala Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in the world 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind let’s review the key hedge fund action surrounding Alta Equipment Group Inc. (NYSE:ALTG).

What have hedge funds been doing with Alta Equipment Group Inc. (NYSE:ALTG)?

Heading into the second quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 100% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ALTG over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

The largest stake in Alta Equipment Group Inc. (NYSE:ALTG) was held by Nantahala Capital Management, which reported holding $10.3 million worth of stock at the end of September. It was followed by Omni Partners with a $5.6 million position. Other investors bullish on the company included Millennium Management, Wexford Capital, and Portolan Capital Management. In terms of the portfolio weights assigned to each position Proxima Capital Management allocated the biggest weight to Alta Equipment Group Inc. (NYSE:ALTG), around 0.94% of its 13F portfolio. AWH Capital is also relatively very bullish on the stock, earmarking 0.93 percent of its 13F equity portfolio to ALTG.

With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Nantahala Capital Management, managed by Wilmot B. Harkey and Daniel Mack, initiated the most outsized position in Alta Equipment Group Inc. (NYSE:ALTG). Nantahala Capital Management had $10.3 million invested in the company at the end of the quarter. Steven Clark’s Omni Partners also initiated a $5.6 million position during the quarter. The following funds were also among the new ALTG investors: Charles Davidson and Joseph Jacobs’s Wexford Capital, George McCabe’s Portolan Capital Management, and Keith M. Rosenbloom’s Cruiser Capital Advisors.

Let’s also examine hedge fund activity in other stocks similar to Alta Equipment Group Inc. (NYSE:ALTG). We will take a look at PC Tel Inc (NASDAQ:PCTI), RTI Surgical Holdings, Inc. (NASDAQ:RTIX), Oxford Square Capital Corp. (NASDAQ:OXSQ), and EyePoint Pharmaceuticals, Inc. (NASDAQ:EYPT). This group of stocks’ market values are similar to ALTG’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PCTI 11 22662 -7
RTIX 10 11461 -3
OXSQ 6 2487 -1
EYPT 3 812 1
Average 7.5 9356 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.5 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $23 million in ALTG’s case. PC Tel Inc (NASDAQ:PCTI) is the most popular stock in this table. On the other hand EyePoint Pharmaceuticals, Inc. (NASDAQ:EYPT) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Alta Equipment Group Inc. (NYSE:ALTG) is more popular among hedge funds. 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 returned 18.6% in 2020 through July 27th but still managed to beat the market by 17.1 percentage points. Hedge funds were also right about betting on ALTG as the stock returned 78.7% since Q1 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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