In this article you are going to find out whether hedge funds think Alarm.com Holdings Inc (NASDAQ:ALRM) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Alarm.com Holdings Inc (NASDAQ:ALRM) shareholders have witnessed a decrease in hedge fund sentiment in recent months. Alarm.com Holdings Inc (NASDAQ:ALRM) was in 21 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 28. There were 22 hedge funds in our database with ALRM holdings at the end of June. Our calculations also showed that ALRM isn’t among the 30 most popular stocks among hedge funds (click for Q2 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. Now we’re going to take a peek at the key hedge fund action encompassing Alarm.com Holdings Inc (NASDAQ:ALRM).
Dmitry Balyasny of Balyasny Asset Management
Do Hedge Funds Think ALRM Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the second quarter of 2021. By comparison, 24 hedge funds held shares or bullish call options in ALRM a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Akre Capital Management held the most valuable stake in Alarm.com Holdings Inc (NASDAQ:ALRM), which was worth $154.7 million at the end of the third quarter. On the second spot was Bares Capital Management which amassed $50.7 million worth of shares. Motley Fool Asset Management, Montanaro Asset Management, and Fisher Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Montanaro Asset Management allocated the biggest weight to Alarm.com Holdings Inc (NASDAQ:ALRM), around 1.98% of its 13F portfolio. Motley Fool Asset Management is also relatively very bullish on the stock, earmarking 1.24 percent of its 13F equity portfolio to ALRM.
Because Alarm.com Holdings Inc (NASDAQ:ALRM) has experienced bearish sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of money managers that slashed their positions entirely in the third quarter. Interestingly, Mark Coe’s Intrinsic Edge Capital dropped the biggest position of the “upper crust” of funds followed by Insider Monkey, comprising an estimated $10.4 million in stock. Peter Muller’s fund, PDT Partners, also said goodbye to its stock, about $1.2 million worth. These transactions are important to note, as total hedge fund interest was cut by 1 funds in the third quarter.
Let’s check out hedge fund activity in other stocks similar to Alarm.com Holdings Inc (NASDAQ:ALRM). These stocks are Leslie’s, Inc. (NASDAQ:LESL), SiTime Corporation (NASDAQ:SITM), BankUnited Inc (NYSE:BKU), Datto Holding Corp. (NYSE:MSP), Recursion Pharmaceuticals Inc. (NASDAQ:RXRX), Schrodinger, Inc. (NASDAQ:SDGR), and Artisan Partners Asset Management Inc (NYSE:APAM). All of these stocks’ market caps match ALRM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LESL | 31 | 342994 | -4 |
| SITM | 21 | 246921 | 4 |
| BKU | 17 | 97881 | 4 |
| MSP | 11 | 2894934 | -1 |
| RXRX | 13 | 299050 | 13 |
| SDGR | 20 | 666585 | 0 |
| APAM | 15 | 210633 | -4 |
| Average | 18.3 | 679857 | 1.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.3 hedge funds with bullish positions and the average amount invested in these stocks was $680 million. That figure was $311 million in ALRM’s case. Leslie’s, Inc. (NASDAQ:LESL) is the most popular stock in this table. On the other hand Datto Holding Corp. (NYSE:MSP) is the least popular one with only 11 bullish hedge fund positions. Alarm.com Holdings Inc (NASDAQ:ALRM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ALRM is 51.5. 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. 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 still beat the market by 3.6 percentage points. Hedge funds were also right about betting on ALRM as the stock returned 8.5% since the end of Q3 (through 12/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Alarm.com Holdings Inc. (NASDAQ:ALRM)
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Disclosure: None. This article was originally published at Insider Monkey.
