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AstroNova, Inc. (ALOT): Hedge Funds In Wait-and-See Mode

Abigail Fisher
·6 mins read

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards AstroNova, Inc. (NASDAQ:ALOT).

AstroNova, Inc. (NASDAQ:ALOT) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 7 hedge funds' portfolios at the end of March. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Synlogic, Inc. (NASDAQ:SYBX), ReneSola Ltd. (NYSE:SOL), and Big Rock Partners Acquisition Corp. (NASDAQ:BRPA) to gather more data points. Our calculations also showed that ALOT isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_731890" align="aligncenter" width="393"] John Rogers of Ariel Investments[/caption]

John Rogers Ariel Investments
John Rogers Ariel Investments

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to review the key hedge fund action encompassing AstroNova, Inc. (NASDAQ:ALOT).

How are hedge funds trading AstroNova, Inc. (NASDAQ:ALOT)?

At Q1's end, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 8 hedge funds with a bullish position in ALOT a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, John W. Rogers's Ariel Investments has the biggest position in AstroNova, Inc. (NASDAQ:ALOT), worth close to $2.9 million, accounting for 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is Royce & Associates, led by Chuck Royce, holding a $1.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions consist of Renaissance Technologies, Peter Schliemann's Rutabaga Capital Management and John Overdeck and David Siegel's Two Sigma Advisors. In terms of the portfolio weights assigned to each position Rutabaga Capital Management allocated the biggest weight to AstroNova, Inc. (NASDAQ:ALOT), around 0.53% of its 13F portfolio. Ariel Investments is also relatively very bullish on the stock, dishing out 0.05 percent of its 13F equity portfolio to ALOT.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Winton Capital Management).

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as AstroNova, Inc. (NASDAQ:ALOT) but similarly valued. These stocks are Synlogic, Inc. (NASDAQ:SYBX), ReneSola Ltd. (NYSE:SOL), Big Rock Partners Acquisition Corp. (NASDAQ:BRPA), and Kingstone Companies Inc (NASDAQ:KINS). This group of stocks' market values match ALOT's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SYBX,6,5652,-1 SOL,3,17210,1 BRPA,6,2055,-2 KINS,4,4606,-1 Average,4.75,7381,-0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.75 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $8 million in ALOT's case. Synlogic, Inc. (NASDAQ:SYBX) is the most popular stock in this table. On the other hand ReneSola Ltd. (NYSE:SOL) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks AstroNova, Inc. (NASDAQ:ALOT) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. Unfortunately ALOT wasn't nearly as popular as these 10 stocks and hedge funds that were betting on ALOT were disappointed as the stock returned 5.7% during the second quarter (through June 10th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

[company-follow-email id=8146][/company-follow-email]

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

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