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Is AstroNova, Inc. (ALOT) A Good Stock To Buy?

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·6 min read
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Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards AstroNova, Inc. (NASDAQ:ALOT) changed recently.

Is ALOT a good stock to buy? Money managers were cutting their exposure. The number of long hedge fund positions were trimmed by 1 in recent months. AstroNova, Inc. (NASDAQ:ALOT) was in 6 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 12. Our calculations also showed that ALOT isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the eyes of most stock holders, hedge funds are perceived as slow, old investment tools of years past. While there are over 8000 funds trading today, We choose to focus on the bigwigs of this club, approximately 850 funds. These money managers shepherd most of all hedge funds' total capital, and by shadowing their highest performing picks, Insider Monkey has formulated a number of investment strategies that have historically defeated Mr. Market. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Chuck Royce
Chuck Royce

Chuck Royce of Royce & Associates

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $24 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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 let's analyze the key hedge fund action surrounding AstroNova, Inc. (NASDAQ:ALOT).

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

Heading into the second quarter of 2021, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from one quarter earlier. On the other hand, there were a total of 7 hedge funds with a bullish position in ALOT a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Royce & Associates held the most valuable stake in AstroNova, Inc. (NASDAQ:ALOT), which was worth $6.5 million at the end of the fourth quarter. On the second spot was Juniper Investment Company which amassed $4.2 million worth of shares. Rutabaga Capital Management, Renaissance Technologies, and Ariel Investments were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Juniper Investment Company allocated the biggest weight to AstroNova, Inc. (NASDAQ:ALOT), around 2.97% of its 13F portfolio. Rutabaga Capital Management is also relatively very bullish on the stock, setting aside 1.22 percent of its 13F equity portfolio to ALOT.

Due to the fact that AstroNova, Inc. (NASDAQ:ALOT) has witnessed falling interest from the smart money, we can see that there lies a certain "tier" of money managers that elected to cut their positions entirely in the first quarter. Intriguingly, Ali Motamed's Invenomic Capital Management dropped the biggest position of the "upper crust" of funds tracked by Insider Monkey, comprising about $0.3 million in stock. Israel Englander's fund, Millennium Management, also dropped its stock, about $0.2 million worth. These moves are important to note, as total hedge fund interest dropped by 1 funds in the first quarter.

Let's go over hedge fund activity in other stocks similar to AstroNova, Inc. (NASDAQ:ALOT). These stocks are HMN Financial, Inc. (NASDAQ:HMNF), Weidai Ltd. (NYSE:WEI), Martin Midstream Partners L.P. (NASDAQ:MMLP), Yunhong International (NASDAQ:ZGYHU), AzurRx BioPharma, Inc. (NASDAQ:AZRX), The New Home Company Inc (NYSE:NWHM), and Fuel Tech Inc. (NASDAQ:FTEK). All of these stocks' market caps are similar to ALOT's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HMNF,3,17961,0 WEI,2,369,1 MMLP,1,26,0 ZGYHU,7,20471,2 AZRX,2,143,1 NWHM,5,7673,-1 FTEK,4,9600,1 Average,3.4,8035,0.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 3.4 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $17 million in ALOT's case. Yunhong International (NASDAQ:ZGYHU) is the most popular stock in this table. On the other hand Martin Midstream Partners L.P. (NASDAQ:MMLP) is the least popular one with only 1 bullish hedge fund positions. AstroNova, Inc. (NASDAQ:ALOT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ALOT is 60.7. 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 positive signal but 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 19.3% in 2021 through June 25th and beat the market again by 4.8 percentage points. Unfortunately ALOT wasn't nearly as popular as these 5 stocks and hedge funds that were betting on ALOT were disappointed as the stock returned 1.1% since the end of March (through 6/25) 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 many of these stocks already outperformed the market since 2019.

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