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Were Hedge Funds Wrong About Piling Into Alteryx, Inc. (AYX)?

Abigail Fisher
·6 min read

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Alteryx, Inc. (NYSE:AYX).

Alteryx, Inc. (NYSE:AYX) investors should pay attention to an increase in support from the world's most elite money managers in recent months. Alteryx, Inc. (NYSE:AYX) was in 48 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 44. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 43 hedge funds in our database with AYX positions at the end of the first quarter. Our calculations also showed that AYX 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.

Today there are tons of indicators stock traders can use to appraise stocks. Two of the less known indicators are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the elite money managers can outperform their index-focused peers by a significant margin (see the details here).

Blair Levinsky of Waratah Capital Advisors
Blair Levinsky of Waratah Capital Advisors

Blair Levinsky of Waratah Capital Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 best high dividend stocks to buy to identify solid dividend stocks trading at rock bottom prices. 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. Now let's take a look at the fresh hedge fund action encompassing Alteryx, Inc. (NYSE:AYX).

What does smart money think about Alteryx, Inc. (NYSE:AYX)?

At the end of June, a total of 48 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from one quarter earlier. By comparison, 38 hedge funds held shares or bullish call options in AYX a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

According to Insider Monkey's hedge fund database, Colin Moran's Abdiel Capital Advisors has the most valuable position in Alteryx, Inc. (NYSE:AYX), worth close to $392.9 million, amounting to 11.6% of its total 13F portfolio. Coming in second is Bares Capital Management, managed by Brian Bares, which holds a $267.3 million position; 6.6% of its 13F portfolio is allocated to the company. Other peers that hold long positions comprise Panayotis Takis Sparaggis's Alkeon Capital Management, Alex Sacerdote's Whale Rock Capital Management and Brian Ashford-Russell and Tim Woolley's Polar Capital. In terms of the portfolio weights assigned to each position Abdiel Capital Advisors allocated the biggest weight to Alteryx, Inc. (NYSE:AYX), around 11.61% of its 13F portfolio. Bares Capital Management is also relatively very bullish on the stock, designating 6.6 percent of its 13F equity portfolio to AYX.

With a general bullishness amongst the heavyweights, some big names were leading the bulls' herd. Point72 Asset Management, managed by Steve Cohen, established the largest position in Alteryx, Inc. (NYSE:AYX). Point72 Asset Management had $62.6 million invested in the company at the end of the quarter. Nancy Zevenbergen's Zevenbergen Capital Investments also made a $41.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Brad Dunkley and Blair Levinsky's Waratah Capital Advisors, Seth Wunder's Black-and-White Capital, and Phill Gross and Robert Atchinson's Adage Capital Management.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Alteryx, Inc. (NYSE:AYX) but similarly valued. These stocks are Gartner Inc (NYSE:IT), Trimble Inc. (NASDAQ:TRMB), VICI Properties Inc. (NYSE:VICI), Citizens Financial Group Inc (NYSE:CFG), StoneCo Ltd. (NASDAQ:STNE), United Rentals, Inc. (NYSE:URI), and Booz Allen Hamilton Holding Corporation (NYSE:BAH). This group of stocks' market values resemble AYX's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IT,32,1302132,0 TRMB,26,979865,6 VICI,51,1573468,15 CFG,47,841328,1 STNE,35,1342781,1 URI,40,889794,-3 BAH,25,219237,-2 Average,36.6,1021229,2.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.6 hedge funds with bullish positions and the average amount invested in these stocks was $1021 million. That figure was $1613 million in AYX's case. VICI Properties Inc. (NYSE:VICI) is the most popular stock in this table. On the other hand Booz Allen Hamilton Holding Corporation (NYSE:BAH) is the least popular one with only 25 bullish hedge fund positions. Alteryx, Inc. (NYSE:AYX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AYX is 84.2. 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 30% in 2020 through October 23rd and beat the market by 21 percentage points. Unfortunately AYX wasn't nearly as popular as these 10 stocks and hedge funds that were betting on AYX were disappointed as the stock returned -15.5% since the end of June (through 10/23) 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.

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