We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Altair Engineering Inc. (NASDAQ:ALTR) based on that data.
Is Altair Engineering Inc. (NASDAQ:ALTR) a buy here? Prominent investors are taking a pessimistic view. The number of long hedge fund positions fell by 1 in recent months. Our calculations also showed that ALTR 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). ALTR was in 9 hedge funds' portfolios at the end of March. There were 10 hedge funds in our database with ALTR 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_140292" align="aligncenter" width="400"] Israel Englander of Millennium Management[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, We take a look at lists like the top 15 defense contractors in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to take a glance at the recent hedge fund action regarding Altair Engineering Inc. (NASDAQ:ALTR).
Hedge fund activity in Altair Engineering Inc. (NASDAQ:ALTR)
At the end of the first quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from one quarter earlier. By comparison, 18 hedge funds held shares or bullish call options in ALTR a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, David Goel and Paul Ferri's Matrix Capital Management has the biggest position in Altair Engineering Inc. (NASDAQ:ALTR), worth close to $109.6 million, accounting for 2.8% of its total 13F portfolio. The second largest stake is held by Impax Asset Management, managed by Ian Simm, which holds a $47.9 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Remaining peers that hold long positions include Panayotis Takis Sparaggis's Alkeon Capital Management, Panayotis Takis Sparaggis's Alkeon Capital Management and D. E. Shaw's D E Shaw. In terms of the portfolio weights assigned to each position Matrix Capital Management allocated the biggest weight to Altair Engineering Inc. (NASDAQ:ALTR), around 2.8% of its 13F portfolio. Impax Asset Management is also relatively very bullish on the stock, setting aside 0.64 percent of its 13F equity portfolio to ALTR.
Because Altair Engineering Inc. (NASDAQ:ALTR) has faced bearish sentiment from hedge fund managers, it's safe to say that there was a specific group of fund managers that slashed their entire stakes by the end of the first quarter. At the top of the heap, Brian Ashford-Russell and Tim Woolley's Polar Capital cut the biggest position of the 750 funds tracked by Insider Monkey, worth an estimated $29.7 million in stock. Benjamin A. Smith's fund, Laurion Capital Management, also sold off its stock, about $0.6 million worth. These moves are important to note, as total hedge fund interest was cut by 1 funds by the end of the first quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Altair Engineering Inc. (NASDAQ:ALTR) but similarly valued. These stocks are Saia Inc (NASDAQ:SAIA), Arcosa, Inc. (NYSE:ACA), Copa Holdings, S.A. (NYSE:CPA), and RH (NYSE:RH). This group of stocks' market values are similar to ALTR's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SAIA,13,63362,-4 ACA,17,184066,-3 CPA,15,138965,-7 RH,30,549200,-8 Average,18.75,233898,-5.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $234 million. That figure was $196 million in ALTR's case. RH (NYSE:RH) is the most popular stock in this table. On the other hand Saia Inc (NASDAQ:SAIA) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Altair Engineering Inc. (NASDAQ:ALTR) is even less popular than SAIA. Hedge funds clearly dropped the ball on ALTR as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 and still beat the market by 15.9 percentage points. A small number of hedge funds were also right about betting on ALTR as the stock returned 47.7% so far in the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.