Did Hedge Funds Catch A Break With Allegion plc (ALLE)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 867 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. Hedge funds’ consensus stock picks performed spectacularly over the last 3 years, but 2022 hasn’t been kind to hedge funds. In this article we look at how hedge funds traded Allegion plc (NYSE:ALLE) and determine whether the smart money was really smart about this stock.

Is Allegion plc (NYSE:ALLE) a buy here? The best stock pickers were in a bearish mood. The number of long hedge fund bets shrunk by 5 in recent months. Allegion plc (NYSE:ALLE) was in 32 hedge funds’ portfolios at the end of September. The all time high for this statistic is 37. Our calculations also showed that ALLE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s take a peek at the new hedge fund action surrounding Allegion plc (NYSE:ALLE).

John Overdeck of Two Sigma Advisors

Do Hedge Funds Think ALLE Is A Good Stock To Buy Now?

At Q3’s end, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the previous quarter. By comparison, 32 hedge funds held shares or bullish call options in ALLE a year ago. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Ako Capital, managed by Nicolai Tangen, holds the most valuable position in Allegion plc (NYSE:ALLE). Ako Capital has a $263.1 million position in the stock, comprising 2.7% of its 13F portfolio. The second most bullish fund manager is Intermede Investment Partners, managed by Barry Dargan, which holds a $144.3 million position; the fund has 3.3% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism encompass Israel Englander’s Millennium Management, Peter Simmie’s Bristol Gate Capital Partners and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Cartenna Capital allocated the biggest weight to Allegion plc (NYSE:ALLE), around 6.38% of its 13F portfolio. Bristol Gate Capital Partners is also relatively very bullish on the stock, dishing out 4.34 percent of its 13F equity portfolio to ALLE.

Since Allegion plc (NYSE:ALLE) has witnessed declining sentiment from the smart money, it’s safe to say that there was a specific group of funds that slashed their entire stakes last quarter. At the top of the heap, Ken Griffin’s Citadel Investment Group dropped the biggest investment of all the hedgies watched by Insider Monkey, totaling about $144.1 million in stock. Javier Velazquez’s fund, Albar Capital, also sold off its stock, about $36.8 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 5 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Allegion plc (NYSE:ALLE) but similarly valued. We will take a look at Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF), Qiagen NV (NYSE:QGEN), Bruker Corporation (NASDAQ:BRKR), Godaddy Inc (NYSE:GDDY), FMC Corporation (NYSE:FMC), InterContinental Hotels Group PLC (NYSE:IHG), and Trex Company, Inc. (NYSE:TREX). This group of stocks’ market valuations match ALLE’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.9 hedge funds with bullish positions and the average amount invested in these stocks was $648 million. That figure was $1002 million in ALLE’s case. Godaddy Inc (NYSE:GDDY) is the most popular stock in this table. On the other hand Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) is the least popular one with only 6 bullish hedge fund positions. Allegion plc (NYSE:ALLE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ALLE is 67.9. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, ALLE wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ALLE were disappointed as the stock returned -6.9% since the end of September (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.