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Is Allegro MicroSystems (ALGM) Stock a Buy For 2021?

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Alex Smith
·3 min read
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Baron Discovery Fund recently published its fourth-quarter commentary – a copy of which can be downloaded here. During the fourth quarter of 2020, the Baron Discovery Fund returned 25.54% (institutional shares). This was 4.07% lower than the Russell 2000 Growth Index, the Fund’s primary benchmark index. You should check out Baron Discovery Fund’s top 5 stock picks for investors to buy right now, which could be the biggest winners of 2021.

In the Q4 2020 Investor Letter, Baron Discovery Fund highlighted a few stocks and Allegro Microsystems Inc. (NASDAQ:ALGM) is one of them. Allegro Microsystems Inc. (NASDAQ:ALGM) develops advanced semiconductor devices. In the last three months, Allegro Microsystems Inc. (NASDAQ:ALGM) stock gained 49% and on February 1st it had a closing price of $30.36. Here is what Baron Discovery Fund said:

"Shares of Allegro MicroSystems, Inc., a fabless designer and manufacturer of sensor integrated circuits (“ICs”) and application-specific analog power ICs for automotive and industrial markets, rose after its IPO in the quarter. The company is the leading supplier of magnetic sensing ICs to the automotive end market, where they are used in internal combustion engine and electric vehicles and advanced safety applications. Its magnetic sensing ICs are used as position sensors, speed sensors, and current sensors in applications such as seatbelt detection, automated driver assist system power steering and braking, camshaft and crankshaft position detection, and electric vehicle powertrain. The company also sells its analog power products into automotive, general industrial, and data center end markets, with products focusing on motor driver ICs in high-efficiency motor applications such as data center cooling, appliances, and robotics. The data center segment, in particular, is growing very rapidly as Allegro’s solutions allow one power source to power full server racks (instead of needing a power source for each server) with automated monitoring and controls. This leads to high energy efficiency which adds up at a giant data center. Shares performed well on expectations of increased near-term earnings due to a faster-than-expected recovery in automotive end markets. The company has a large opportunity for growth given its leading product performance, in our view, as electronic content in its end markets continues growing, driven by the key mega trends of automotive electrification, improving safety standards, automation, and increasing data consumption."

Our calculations showed that Allegro Microsystems Inc. (NASDAQ:ALGM) isn't ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 216% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 121 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds' poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. 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. You can subscribe to our free daily newsletter on our website:

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