Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Allison Transmission Holdings Inc (NYSE:ALSN) in this article.
Allison Transmission Holdings Inc (NYSE:ALSN) has experienced a decrease in hedge fund interest in recent months. Our calculations also showed that ALSN isn't among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, 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 review the recent hedge fund action encompassing Allison Transmission Holdings Inc (NYSE:ALSN).
How are hedge funds trading Allison Transmission Holdings Inc (NYSE:ALSN)?
At Q2's end, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from one quarter earlier. By comparison, 23 hedge funds held shares or bullish call options in ALSN a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Ashe Capital held the most valuable stake in Allison Transmission Holdings Inc (NYSE:ALSN), which was worth $230.7 million at the end of the second quarter. On the second spot was D E Shaw which amassed $155.5 million worth of shares. Moreover, Renaissance Technologies, GLG Partners, and Arrowstreet Capital were also bullish on Allison Transmission Holdings Inc (NYSE:ALSN), allocating a large percentage of their portfolios to this stock.
Because Allison Transmission Holdings Inc (NYSE:ALSN) has faced falling interest from the entirety of the hedge funds we track, it's safe to say that there is a sect of hedge funds that slashed their full holdings last quarter. Intriguingly, Lou Simpson's SQ Advisors sold off the biggest position of the 750 funds tracked by Insider Monkey, valued at about $170.3 million in stock. Andrew Feldstein and Stephen Siderow's fund, Blue Mountain Capital, also dropped its stock, about $14.6 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 3 funds last quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Allison Transmission Holdings Inc (NYSE:ALSN) but similarly valued. We will take a look at IAA, Inc. (NYSE:IAA), LATAM Airlines Group S.A. (NYSE:LTM), Quanta Services Inc (NYSE:PWR), and Park Hotels & Resorts Inc. (NYSE:PK). This group of stocks' market valuations match ALSN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IAA,42,908956,42 LTM,5,17929,-3 PWR,29,539950,5 PK,25,374204,11 Average,25.25,460260,13.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $460 million. That figure was $895 million in ALSN's case. IAA, Inc. (NYSE:IAA) is the most popular stock in this table. On the other hand LATAM Airlines Group S.A. (NYSE:LTM) is the least popular one with only 5 bullish hedge fund positions. Allison Transmission Holdings Inc (NYSE:ALSN) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks (view the video below) among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on ALSN, though not to the same extent, as the stock returned 1.9% during the third quarter and outperformed the market. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.