Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Ally Financial Inc (NYSE:ALLY).
Ally Financial Inc (NYSE:ALLY) investors should be aware of an increase in enthusiasm from smart money recently.ALLY was in 50 hedge funds’ portfolios at the end of September, 1 more than what was at the end of the previous quarter. At the end of this article we will also compare ALLY to other stocks including Bunge Ltd (NYSE:BG), Mobile TeleSystems OJSC (ADR) (NYSE:MBT), and The AES Corporation (NYSE:AES) to get a better sense of its popularity.
Follow Ally Financial Inc. (NYSE:ALLY)
Follow Ally Financial Inc. (NYSE:ALLY)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Keeping this in mind, let’s take a gander at the new action regarding Ally Financial Inc (NYSE:ALLY).
Hedge fund activity in Ally Financial Inc (NYSE:ALLY)
Heading into the fourth quarter of 2016, a total of 50 of the hedge funds tracked by Insider Monkey were long this stock, a change of 2% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Cerberus Capital Management, managed by Stephen Feinberg, holds the biggest position in Ally Financial Inc (NYSE:ALLY). Cerberus Capital Management has a $469.5 million position in the stock, comprising 77.5% of its 13F portfolio. On Cerberus Capital Management’s heels is First Pacific Advisors LLC, led by Robert Rodriguez and Steven Romick, holding a $210.2 million position; the fund has 1.7% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish consist of Howard Marks’ Oaktree Capital Management, Joshua Friedman and Mitchell Julis’ Canyon Capital Advisors and Stephen C. Freidheim’s Cyrus Capital Partners.
Now, key money managers were breaking ground themselves. Brenner West Capital Partners, managed by Joshua Kaufman and Craig Nerenberg, initiated the most outsized position in Ally Financial Inc (NYSE:ALLY). Brenner West Capital Partners had $52 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also made a $14.6 million investment in the stock during the quarter. The other funds with brand new ALLY positions are Ken Griffin’s Citadel Investment Group, Benjamin A. Smith’s Laurion Capital Management, and Robert I. Usdan and Wayne K. Goldstein’s Endicott Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Ally Financial Inc (NYSE:ALLY) but similarly valued. We will take a look at Bunge Ltd (NYSE:BG), Mobile TeleSystems OJSC (ADR) (NYSE:MBT), The AES Corporation (NYSE:AES), and Synopsys, Inc. (NASDAQ:SNPS). This group of stocks’ market caps match ALLY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BG | 23 | 782864 | -10 |
| MBT | 17 | 183462 | 0 |
| AES | 22 | 107548 | 3 |
| SNPS | 22 | 417138 | 1 |
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $373 million. That figure was $2.27 billion in ALLY’s case. Bunge Ltd (NYSE:BG) is the most popular stock in this table. On the other hand Mobile TeleSystems OJSC (ADR) (NYSE:MBT) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Ally Financial Inc (NYSE:ALLY) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
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