Alamo Group, Inc. (ALG): Are Hedge Funds Right About This Stock?

Alamo Group, Inc. (NYSE:ALG) was in 9 hedge funds’ portfolio at the end of the first quarter of 2013. ALG investors should pay attention to an increase in hedge fund sentiment in recent months. There were 8 hedge funds in our database with ALG positions at the end of the previous quarter.

In the financial world, there are a multitude of gauges shareholders can use to track the equity markets. A pair of the most under-the-radar are hedge fund and insider trading interest. At Insider Monkey, our studies have shown that, historically, those who follow the best picks of the best fund managers can outperform the S&P 500 by a significant amount (see just how much).

Equally as beneficial, positive insider trading activity is another way to parse down the stock market universe. Obviously, there are a number of incentives for a corporate insider to sell shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Many academic studies have demonstrated the impressive potential of this tactic if investors know where to look (learn more here).

With these “truths” under our belt, we’re going to take a look at the recent action regarding Alamo Group, Inc. (NYSE:ALG).

How are hedge funds trading Alamo Group, Inc. (NYSE:ALG)?

In preparation for this quarter, a total of 9 of the hedge funds we track were long in this stock, a change of 13% from one quarter earlier. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes substantially.

According to our comprehensive database, Longview Asset Management, managed by James A. Star, holds the most valuable position in Alamo Group, Inc. (NYSE:ALG). Longview Asset Management has a $65 million position in the stock, comprising 2.2% of its 13F portfolio. On Longview Asset Management’s heels is Chuck Royce of Royce & Associates, with a $47.6 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining hedgies that hold long positions include Martin Whitman’s Third Avenue Management, Jim Simons’s Renaissance Technologies and Joel Greenblatt’s Gotham Asset Management.

As aggregate interest increased, some big names were breaking ground themselves. Two Sigma Advisors, managed by John Overdeck and David Siegel, created the largest position in Alamo Group, Inc. (NYSE:ALG). Two Sigma Advisors had 0.5 million invested in the company at the end of the quarter. Neil Chriss’s Hutchin Hill Capital also initiated a $0.3 million position during the quarter.

How are insiders trading Alamo Group, Inc. (NYSE:ALG)?

Insider trading activity, especially when it’s bullish, is best served when the primary stock in question has experienced transactions within the past 180 days. Over the latest half-year time period, Alamo Group, Inc. (NYSE:ALG) has seen zero unique insiders purchasing, and 4 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Alamo Group, Inc. (NYSE:ALG). These stocks are Lindsay Corporation (NYSE:LNN), Astec Industries, Inc. (NASDAQ:ASTE), Cascade Corporation (NYSE:CASC), NACCO Industries, Inc. (NYSE:NC), and Columbus McKinnon Corp. (NASDAQ:CMCO). This group of stocks are the members of the farm & construction machinery industry and their market caps resemble ALG’s market cap.

With the returns shown by the aforementioned time-tested strategies, retail investors should always watch hedge fund and insider trading activity, and Alamo Group, Inc. (NYSE:ALG) applies perfectly to this mantra.

Click here to learn why you should track hedge funds