In this article we will take a look at whether hedge funds think Allegiant Travel Company (NASDAQ:ALGT) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Allegiant Travel Company (NASDAQ:ALGT) the right investment to pursue these days? Money managers are in a bearish mood. The number of long hedge fund positions retreated by 5 in recent months. Our calculations also showed that ALGT 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). ALGT was in 19 hedge funds' portfolios at the end of the first quarter of 2020. There were 24 hedge funds in our database with ALGT holdings at the end of the previous quarter. 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_747408" align="aligncenter" width="398"] Paul Reeder of PAR Capital Management[/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. 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 let's take a gander at the latest hedge fund action surrounding Allegiant Travel Company (NASDAQ:ALGT).
How have hedgies been trading Allegiant Travel Company (NASDAQ:ALGT)?
At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -21% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ALGT over the last 18 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Allegiant Travel Company (NASDAQ:ALGT) was held by PAR Capital Management, which reported holding $130 million worth of stock at the end of September. It was followed by Diamond Hill Capital with a $41.8 million position. Other investors bullish on the company included Ancient Art (Teton Capital), Marshall Wace LLP, and First Pacific Advisors LLC. In terms of the portfolio weights assigned to each position Mountain Lake Investment Management allocated the biggest weight to Allegiant Travel Company (NASDAQ:ALGT), around 7.23% of its 13F portfolio. PAR Capital Management is also relatively very bullish on the stock, designating 5.52 percent of its 13F equity portfolio to ALGT.
Since Allegiant Travel Company (NASDAQ:ALGT) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there is a sect of hedge funds who were dropping their full holdings last quarter. Interestingly, Chuck Royce's Royce & Associates dumped the biggest investment of the 750 funds followed by Insider Monkey, valued at an estimated $26.6 million in stock, and Dmitry Balyasny's Balyasny Asset Management was right behind this move, as the fund dumped about $10.9 million worth. These moves are important to note, as total hedge fund interest fell by 5 funds last quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Allegiant Travel Company (NASDAQ:ALGT) but similarly valued. These stocks are PROS Holdings, Inc. (NYSE:PRO), Visteon Corp (NASDAQ:VC), Korn Ferry (NYSE:KFY), and ProAssurance Corporation (NYSE:PRA). This group of stocks' market values resemble ALGT's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PRO,16,151037,-4 VC,19,152241,-10 KFY,20,136009,1 PRA,10,124328,-8 Average,16.25,140904,-5.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $141 million. That figure was $252 million in ALGT's case. Korn Ferry (NYSE:KFY) is the most popular stock in this table. On the other hand ProAssurance Corporation (NYSE:PRA) is the least popular one with only 10 bullish hedge fund positions. Allegiant Travel Company (NASDAQ:ALGT) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.4% in 2020 through June 22nd but still beat the market by 15.9 percentage points. Hedge funds were also right about betting on ALGT as the stock returned 34.8% in Q2 (through June 22nd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.