Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by nearly 10 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Altair Engineering Inc. (NASDAQ:ALTR).
Altair Engineering Inc. (NASDAQ:ALTR) has experienced a decrease in enthusiasm from smart money in recent months. Our calculations also showed that ALTR 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.
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.
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Chuck Royce of Royce & Associates[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds' buy/sell signals. Let's take a peek at the new hedge fund action surrounding Altair Engineering Inc. (NASDAQ:ALTR).
What does smart money think about Altair Engineering Inc. (NASDAQ:ALTR)?
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -29% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards ALTR over the last 17 quarters. So, let's examine 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, Ian Simm's Impax Asset Management has the number one position in Altair Engineering Inc. (NASDAQ:ALTR), worth close to $36.5 million, amounting to 0.5% of its total 13F portfolio. Sitting at the No. 2 spot is Alkeon Capital Management, led by Panayotis Takis Sparaggis, holding a $31.3 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions include David Goel and Paul Ferri's Matrix Capital Management, Brian Ashford-Russell and Tim Woolley's Polar Capital and Chuck Royce's Royce & Associates. In terms of the portfolio weights assigned to each position Matrix Capital Management allocated the biggest weight to Altair Engineering Inc. (NASDAQ:ALTR), around 0.6% of its 13F portfolio. Impax Asset Management is also relatively very bullish on the stock, earmarking 0.48 percent of its 13F equity portfolio to ALTR.
Since Altair Engineering Inc. (NASDAQ:ALTR) has faced a decline in interest from hedge fund managers, it's easy to see that there were a few money managers who sold off their full holdings in the third quarter. It's worth mentioning that Dmitry Balyasny's Balyasny Asset Management dropped the biggest position of the "upper crust" of funds tracked by Insider Monkey, comprising close to $12.3 million in stock, and Michael Hintze's CQS Cayman LP was right behind this move, as the fund dumped about $10.2 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 4 funds in the third quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Altair Engineering Inc. (NASDAQ:ALTR) but similarly valued. We will take a look at Spirit Airlines Incorporated (NYSE:SAVE), Cloudera, Inc. (NYSE:CLDR), Columbia Property Trust Inc (NYSE:CXP), and CNO Financial Group Inc (NYSE:CNO). This group of stocks' market valuations are similar to ALTR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SAVE,24,183395,-7 CLDR,26,652627,1 CXP,14,69448,2 CNO,16,194919,2 Average,20,275097,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $275 million. That figure was $129 million in ALTR's case. Cloudera, Inc. (NYSE:CLDR) is the most popular stock in this table. On the other hand Columbia Property Trust Inc (NYSE:CXP) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Altair Engineering Inc. (NASDAQ:ALTR) is even less popular than CXP. Hedge funds dodged a bullet by taking a bearish stance towards ALTR. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ALTR wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); ALTR investors were disappointed as the stock returned -4.2% 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.