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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 second 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 Alarm.com Holdings Inc (NASDAQ:ALRM) based on that data and determine whether they were really smart about the stock.
Is Alarm.com Holdings Inc (NASDAQ:ALRM) a buy, sell, or hold? Investors who are in the know were becoming more confident. The number of long hedge fund positions rose by 1 in recent months. Alarm.com Holdings Inc (NASDAQ:ALRM) was in 24 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 28. Our calculations also showed that ALRM isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
At the moment there are plenty of formulas market participants use to appraise their holdings. Two of the less known formulas are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the elite investment managers can outpace the broader indices by a solid amount (see the details here).
Bruce Kovner of Caxton Associates LP
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. With all of this in mind we're going to take a look at the key hedge fund action regarding Alarm.com Holdings Inc (NASDAQ:ALRM).
Hedge fund activity in Alarm.com Holdings Inc (NASDAQ:ALRM)
At second quarter's end, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the previous quarter. On the other hand, there were a total of 19 hedge funds with a bullish position in ALRM a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Akre Capital Management held the most valuable stake in Alarm.com Holdings Inc (NASDAQ:ALRM), which was worth $115.7 million at the end of the third quarter. On the second spot was Bares Capital Management which amassed $29.8 million worth of shares. Motley Fool Asset Management, Fisher Asset Management, and Intrinsic Edge Capital 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 Motley Fool Asset Management allocated the biggest weight to Alarm.com Holdings Inc (NASDAQ:ALRM), around 1.37% of its 13F portfolio. Intrinsic Edge Capital is also relatively very bullish on the stock, designating 1.2 percent of its 13F equity portfolio to ALRM.
Now, key hedge funds have jumped into Alarm.com Holdings Inc (NASDAQ:ALRM) headfirst. Laurion Capital Management, managed by Benjamin A. Smith, initiated the biggest position in Alarm.com Holdings Inc (NASDAQ:ALRM). Laurion Capital Management had $1.9 million invested in the company at the end of the quarter. Matthew L Pinz's Pinz Capital also initiated a $1.6 million position during the quarter. The following funds were also among the new ALRM investors: Paul Tudor Jones's Tudor Investment Corp, Michael Gelband's ExodusPoint Capital, and Bruce Kovner's Caxton Associates LP.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Alarm.com Holdings Inc (NASDAQ:ALRM) but similarly valued. These stocks are Selective Insurance Group (NASDAQ:SIGI), VEON Ltd. (NASDAQ:VEON), Stamps.com Inc. (NASDAQ:STMP), iRhythm Technologies, Inc. (NASDAQ:IRTC), ACI Worldwide Inc (NASDAQ:ACIW), New Jersey Resources Corp (NYSE:NJR), and Popular Inc (NASDAQ:BPOP). All of these stocks' market caps resemble ALRM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SIGI,13,48566,-2 VEON,6,21115,-2 STMP,30,566203,1 IRTC,21,160969,6 ACIW,22,293577,-2 NJR,14,40053,0 BPOP,33,521258,5 Average,19.9,235963,0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.9 hedge funds with bullish positions and the average amount invested in these stocks was $236 million. That figure was $226 million in ALRM's case. Popular Inc (NASDAQ:BPOP) is the most popular stock in this table. On the other hand VEON Ltd. (NASDAQ:VEON) is the least popular one with only 6 bullish hedge fund positions. Alarm.com Holdings Inc (NASDAQ:ALRM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ALRM is 65. 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 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 21.3% in 2020 through September 25th and beat the market by 17.7 percentage points. Unfortunately ALRM wasn't nearly as popular as these 10 stocks and hedge funds that were betting on ALRM were disappointed as the stock returned -15.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 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.