Where Do Hedge Funds Stand On Alamo Group, Inc. (ALG)?

In this article we will analyze whether Alamo Group, Inc. (NYSE:ALG) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Alamo Group, Inc. (NYSE:ALG) investors should be aware of a decrease in hedge fund interest in recent months. Alamo Group, Inc. (NYSE:ALG) was in 10 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 15. There were 12 hedge funds in our database with ALG holdings at the end of March. Our calculations also showed that ALG isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 79 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.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we’re going to take a look at the fresh hedge fund action encompassing Alamo Group, Inc. (NYSE:ALG).

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

At the end of June, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ALG over the last 24 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Alamo Group, Inc. (NYSE:ALG) was held by Longview Asset Management, which reported holding $207.9 million worth of stock at the end of June. It was followed by Third Avenue Management with a $4.9 million position. Other investors bullish on the company included Royce & Associates, Citadel Investment Group, and Millennium Management. In terms of the portfolio weights assigned to each position Longview Asset Management allocated the biggest weight to Alamo Group, Inc. (NYSE:ALG), around 3.55% of its 13F portfolio. Third Avenue Management is also relatively very bullish on the stock, designating 0.64 percent of its 13F equity portfolio to ALG.

Since Alamo Group, Inc. (NYSE:ALG) has faced declining sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of fund managers who sold off their entire stakes by the end of the second quarter. Intriguingly, Renaissance Technologies dropped the largest stake of the 750 funds monitored by Insider Monkey, comprising about $2.2 million in stock. Peter Algert’s fund, Algert Global, also dumped its stock, about $0.6 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 2 funds by the end of the second quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Alamo Group, Inc. (NYSE:ALG) but similarly valued. These stocks are Gol Linhas Aereas Inteligentes SA (NYSE:GOL), AssetMark Financial Holdings, Inc. (NYSE:AMK), Global Net Lease, Inc. (NYSE:GNL), PAR Technology Corporation (NYSE:PAR), Eldorado Gold Corp (NYSE:EGO), Great Western Bancorp Inc (NYSE:GWB), and CVR Energy, Inc. (NYSE:CVI). This group of stocks’ market caps match ALG’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.9 hedge funds with bullish positions and the average amount invested in these stocks was $294 million. That figure was $220 million in ALG’s case. PAR Technology Corporation (NYSE:PAR) is the most popular stock in this table. On the other hand AssetMark Financial Holdings, Inc. (NYSE:AMK) is the least popular one with only 9 bullish hedge fund positions. Alamo Group, Inc. (NYSE:ALG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ALG is 29.3. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.7% in 2021 through September 27th and surpassed the market again by 6.2 percentage points. Unfortunately ALG wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); ALG investors were disappointed as the stock returned -4.4% since the end of June (through 9/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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