We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Allegheny Technologies Incorporated (NYSE:ATI).
Is Allegheny Technologies Incorporated (NYSE:ATI) a buy, sell, or hold? Investors who are in the know are taking a bullish view. The number of long hedge fund positions advanced by 1 in recent months. Our calculations also showed that ATI isn't among the 30 most popular stocks among hedge funds. ATI was in 25 hedge funds' portfolios at the end of March. There were 24 hedge funds in our database with ATI holdings at the end of the previous quarter.
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' 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a look at the fresh hedge fund action regarding Allegheny Technologies Incorporated (NYSE:ATI).
What have hedge funds been doing with Allegheny Technologies Incorporated (NYSE:ATI)?
At the end of the first quarter, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards ATI over the last 15 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Gilchrist Berg's Water Street Capital has the biggest position in Allegheny Technologies Incorporated (NYSE:ATI), worth close to $59.4 million, accounting for 3.6% of its total 13F portfolio. Sitting at the No. 2 spot is Fisher Asset Management, led by Ken Fisher, holding a $28.8 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions contain Mario Gabelli's GAMCO Investors, Chuck Royce's Royce & Associates and Don Morgan's Brigade Capital.
With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. ACK Asset Management, managed by Richard S. Meisenberg, established the biggest position in Allegheny Technologies Incorporated (NYSE:ATI). ACK Asset Management had $12.6 million invested in the company at the end of the quarter. Sander Gerber's Hudson Bay Capital Management also made a $4 million investment in the stock during the quarter. The following funds were also among the new ATI investors: John Overdeck and David Siegel's Two Sigma Advisors, Paul Tudor Jones's Tudor Investment Corp, and Joel Greenblatt's Gotham Asset Management.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Allegheny Technologies Incorporated (NYSE:ATI) but similarly valued. These stocks are AutoNation, Inc. (NYSE:AN), Wolverine World Wide, Inc. (NYSE:WWW), Green Dot Corporation (NYSE:GDOT), and Axon Enterprise, Inc. (NASDAQ:AAXN). This group of stocks' market valuations resemble ATI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AN,21,458504,-1 WWW,19,124564,7 GDOT,27,233849,8 AAXN,19,247525,3 Average,21.5,266111,4.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $266 million. That figure was $209 million in ATI's case. Green Dot Corporation (NYSE:GDOT) is the most popular stock in this table. On the other hand Wolverine World Wide, Inc. (NYSE:WWW) is the least popular one with only 19 bullish hedge fund positions. Allegheny Technologies Incorporated (NYSE:ATI) is not the most popular stock in this group but hedge fund interest is still above average. 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately ATI wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ATI were disappointed as the stock returned -14.7% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.