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The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the first quarter, which unveil their equity positions as of March 31st. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Allison Transmission Holdings Inc (NYSE:ALSN).
Allison Transmission Holdings Inc (NYSE:ALSN) investors should pay attention to an increase in hedge fund sentiment in recent months. Allison Transmission Holdings Inc (NYSE:ALSN) was in 30 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 40. There were 25 hedge funds in our database with ALSN positions at the end of the fourth quarter. Our calculations also showed that ALSN isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Noam Gottesman of GLG Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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. With all of this in mind let's take a gander at the fresh hedge fund action encompassing Allison Transmission Holdings Inc (NYSE:ALSN).
Do Hedge Funds Think ALSN Is A Good Stock To Buy Now?
At Q1's end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from one quarter earlier. On the other hand, there were a total of 27 hedge funds with a bullish position in ALSN 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.
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the largest position in Allison Transmission Holdings Inc (NYSE:ALSN), worth close to $219.4 million, accounting for 0.3% of its total 13F portfolio. The second most bullish fund manager is D E Shaw, led by D. E. Shaw, holding a $54.9 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other peers with similar optimism consist of Noam Gottesman's GLG Partners, John Brennan's Sirios Capital Management and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Sirios Capital Management allocated the biggest weight to Allison Transmission Holdings Inc (NYSE:ALSN), around 2.89% of its 13F portfolio. Factorial Partners is also relatively very bullish on the stock, designating 0.64 percent of its 13F equity portfolio to ALSN.
With a general bullishness amongst the heavyweights, key money managers have jumped into Allison Transmission Holdings Inc (NYSE:ALSN) headfirst. Point72 Asset Management, managed by Steve Cohen, established the largest position in Allison Transmission Holdings Inc (NYSE:ALSN). Point72 Asset Management had $8.5 million invested in the company at the end of the quarter. Greg Eisner's Engineers Gate Manager also made a $2.5 million investment in the stock during the quarter. The following funds were also among the new ALSN investors: Alec Litowitz and Ross Laser's Magnetar Capital, Matthew Hulsizer's PEAK6 Capital Management, and Jinghua Yan's TwinBeech Capital.
Let's now review hedge fund activity in other stocks similar to Allison Transmission Holdings Inc (NYSE:ALSN). We will take a look at The Wendy's Company (NASDAQ:WEN), B2Gold Corp (NYSE:BTG), Zhihu Inc. (NYSE:ZH), Element Solutions Inc. (NYSE:ESI), DCP Midstream LP (NYSE:DCP), Simpson Manufacturing Co, Inc. (NYSE:SSD), and Semtech Corporation (NASDAQ:SMTC). All of these stocks' market caps resemble ALSN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WEN,26,1018985,-5 BTG,18,313091,-4 ZH,23,94311,23 ESI,33,624419,4 DCP,4,20645,1 SSD,25,239346,0 SMTC,21,209600,4 Average,21.4,360057,3.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.4 hedge funds with bullish positions and the average amount invested in these stocks was $360 million. That figure was $498 million in ALSN's case. Element Solutions Inc. (NYSE:ESI) is the most popular stock in this table. On the other hand DCP Midstream LP (NYSE:DCP) is the least popular one with only 4 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. Our overall hedge fund sentiment score for ALSN is 77.3. 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 22.8% in 2021 through July 2nd and beat the market again by 6 percentage points. Unfortunately ALSN wasn't nearly as popular as these 5 stocks and hedge funds that were betting on ALSN were disappointed as the stock returned -1.7% since the end of March (through 7/2) 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.