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How Did The Allstate Corporation (ALL) Compare Against Top Hedge Fund Stocks in 2019?

Abigail Fisher

It has been a fantastic year for equity investors as Donald Trump pressured Federal Reserve to reduce interest rates and finalized the first leg of a trade deal with China. If you were a passive index fund investor, you had seen gains of 31% in your equity portfolio in 2019. However, if you were an active investor putting your money into hedge funds' favorite stocks, you had seen gains of more than 41%. In this article we are going to take a look at how hedge funds feel about a stock like The Allstate Corporation (NYSE:ALL) and compare its performance against hedge funds' favorite stocks.

The Allstate Corporation (NYSE:ALL) investors should be aware of an increase in hedge fund interest of late. ALL was in 44 hedge funds' portfolios at the end of the third quarter of 2019. There were 37 hedge funds in our database with ALL positions at the end of the previous quarter. Our calculations also showed that ALL isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_758454" align="aligncenter" width="450"] James Dondero of Highland Capital Management[/caption]

James Dondero Highland Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. With all of this in mind let's take a gander at the fresh hedge fund action regarding The Allstate Corporation (NYSE:ALL).

What have hedge funds been doing with The Allstate Corporation (NYSE:ALL)?

At Q3's end, a total of 44 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ALL over the last 17 quarters. With hedgies' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Among these funds, AQR Capital Management held the most valuable stake in The Allstate Corporation (NYSE:ALL), which was worth $654.2 million at the end of the third quarter. On the second spot was GLG Partners which amassed $237.1 million worth of shares. Citadel Investment Group, Two Sigma Advisors, and Renaissance Technologies 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 RR Partners allocated the biggest weight to The Allstate Corporation (NYSE:ALL), around 3.35% of its 13F portfolio. Prana Capital Management is also relatively very bullish on the stock, setting aside 2.27 percent of its 13F equity portfolio to ALL.

As aggregate interest increased, key money managers have jumped into The Allstate Corporation (NYSE:ALL) headfirst. ExodusPoint Capital, managed by Michael Gelband, established the most outsized position in The Allstate Corporation (NYSE:ALL). ExodusPoint Capital had $5.2 million invested in the company at the end of the quarter. Benjamin A. Smith's Laurion Capital Management also initiated a $3.3 million position during the quarter. The other funds with brand new ALL positions are James Dondero's Highland Capital Management, Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners, and Jeffrey Talpins's Element Capital Management.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as The Allstate Corporation (NYSE:ALL) but similarly valued. These stocks are V.F. Corporation (NYSE:VFC), Dow Inc. (NYSE:DOW), Valero Energy Corporation (NYSE:VLO), and Ecopetrol S.A. (NYSE:EC). This group of stocks' market valuations match ALL's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VFC,33,920216,1 DOW,32,285661,-1 VLO,35,530355,0 EC,10,174854,0 Average,27.5,477772,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.5 hedge funds with bullish positions and the average amount invested in these stocks was $478 million. That figure was $1900 million in ALL's case. Valero Energy Corporation (NYSE:VLO) is the most popular stock in this table. On the other hand Ecopetrol S.A. (NYSE:EC) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks The Allstate Corporation (NYSE:ALL) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on ALL, though not to the same extent, as the stock returned 36.9% during the same period and outperformed the market as well. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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