Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 of 2018 due to various reasons. Nevertheless, the data show elite investors' consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETFs by nearly 10 percentage points during the first 11 months of 2019. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Allison Transmission Holdings Inc (NYSE:ALSN) from the perspective of those elite funds.
Allison Transmission Holdings Inc (NYSE:ALSN) was in 28 hedge funds' portfolios at the end of the third quarter of 2019. ALSN investors should be aware of an increase in hedge fund interest in recent months. There were 25 hedge funds in our database with ALSN holdings at the end of the previous quarter. Our calculations also showed that ALSN isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_758442" align="aligncenter" width="600"] Michael Platt of Bluecrest Capital Management[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to take a look at the fresh hedge fund action surrounding Allison Transmission Holdings Inc (NYSE:ALSN).
What does smart money think about Allison Transmission Holdings Inc (NYSE:ALSN)?
At Q3's end, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from the previous quarter. On the other hand, there were a total of 24 hedge funds with a bullish position in ALSN a year ago. With the smart money's sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, William Crowley, William Harker, and Stephen Blass's Ashe Capital has the most valuable position in Allison Transmission Holdings Inc (NYSE:ALSN), worth close to $234.2 million, comprising 17.9% of its total 13F portfolio. Coming in second is Renaissance Technologies, with a $180.7 million position; 0.2% of its 13F portfolio is allocated to the company. Remaining professional money managers that hold long positions include David E. Shaw's D E Shaw, Noam Gottesman's GLG Partners and Cliff Asness's AQR Capital Management. In terms of the portfolio weights assigned to each position Ashe Capital allocated the biggest weight to Allison Transmission Holdings Inc (NYSE:ALSN), around 17.89% of its portfolio. Factorial Partners is also relatively very bullish on the stock, designating 0.67 percent of its 13F equity portfolio to ALSN.
As industrywide interest jumped, some big names were breaking ground themselves. Alyeska Investment Group, managed by Anand Parekh, assembled the most outsized position in Allison Transmission Holdings Inc (NYSE:ALSN). Alyeska Investment Group had $2 million invested in the company at the end of the quarter. Matthew Tewksbury's Stevens Capital Management also made a $0.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Gelband's ExodusPoint Capital, Michael Platt and William Reeves's BlueCrest Capital Mgmt., and Hoon Kim's Quantinno Capital.
Let's check out 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 Grupo Televisa SAB (NYSE:TV), The Scotts Miracle-Gro Company (NYSE:SMG), Harley-Davidson, Inc. (NYSE:HOG), and BOK Financial Corporation (NASDAQ:BOKF). This group of stocks' market valuations resemble ALSN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TV,14,826232,-4 SMG,30,413760,6 HOG,18,20463,4 BOKF,16,189307,-3 Average,19.5,362441,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $362 million. That figure was $883 million in ALSN's case. The Scotts Miracle-Gro Company (NYSE:SMG) is the most popular stock in this table. On the other hand Grupo Televisa SAB (NYSE:TV) is the least popular one with only 14 bullish hedge fund positions. Allison Transmission Holdings Inc (NYSE:ALSN) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ALSN wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ALSN were disappointed as the stock returned 3.2% during the fourth quarter (through the end of November) 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.