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Do Hedge Funds Love Alico, Inc. (ALCO)?

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  • ALCO

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the third quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Alico, Inc. (NASDAQ:ALCO) based on that data.

Alico, Inc. (NASDAQ:ALCO) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 7 hedge funds' portfolios at the end of September. Our calculations also showed that ALCO isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). 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 PennantPark Investment Corp. (NASDAQ:PNNT), MICT, Inc. (NASDAQ:MICT), and Commercial Vehicle Group, Inc. (NASDAQ:CVGI) to gather more data points.

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 66 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.

Martin Whitman Third Avenue Management Marty Whitman
Martin Whitman Third Avenue Management Marty Whitman

Martin Whitman of Third Avenue Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Now we're going to go over the recent hedge fund action surrounding Alico, Inc. (NASDAQ:ALCO).

How have hedgies been trading Alico, Inc. (NASDAQ:ALCO)?

Heading into the fourth quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ALCO over the last 21 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Third Avenue Management held the most valuable stake in Alico, Inc. (NASDAQ:ALCO), which was worth $4 million at the end of the third quarter. On the second spot was Harbert Management which amassed $3.8 million worth of shares. Birch Run Capital, Renaissance Technologies, and Horizon Asset Management 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 Harbert Management allocated the biggest weight to Alico, Inc. (NASDAQ:ALCO), around 4.7% of its 13F portfolio. Birch Run Capital is also relatively very bullish on the stock, setting aside 2.58 percent of its 13F equity portfolio to ALCO.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Alico, Inc. (NASDAQ:ALCO) but similarly valued. We will take a look at PennantPark Investment Corp. (NASDAQ:PNNT), MICT, Inc. (NASDAQ:MICT), Commercial Vehicle Group, Inc. (NASDAQ:CVGI), Horizon Technology Finance Corp (NASDAQ:HRZN), Auryn Resources Inc. (NYSE:AUG), Priority Technology Holdings, Inc. (NASDAQ:PRTH), and StarTek, Inc. (NYSE:SRT). This group of stocks' market values are similar to ALCO's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PNNT,6,7914,0 MICT,2,263,1 CVGI,12,35587,-1 HRZN,2,2270,0 AUG,5,3610,2 PRTH,2,1652,-1 SRT,2,4387,-1 Average,4.4,7955,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.4 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $16 million in ALCO's case. Commercial Vehicle Group, Inc. (NASDAQ:CVGI) is the most popular stock in this table. On the other hand MICT, Inc. (NASDAQ:MICT) is the least popular one with only 2 bullish hedge fund positions. Alico, Inc. (NASDAQ:ALCO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ALCO is 53.3. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and beat the market again by 16 percentage points. Unfortunately ALCO wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ALCO were disappointed as the stock returned 7.6% since the end of September (through 12/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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

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