There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze AlarmCom Holdings Inc (NASDAQ:ALRM).
AlarmCom Holdings Inc (NASDAQ:ALRM) has experienced a decrease in hedge fund sentiment in recent months. Our calculations also showed that alrm isn’t among the 30 most popular stocks among hedge funds.
In the 21st century investor’s toolkit there are plenty of tools market participants can use to evaluate stocks. A couple of the most under-the-radar tools are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the top hedge fund managers can outclass the market by a solid margin (see the details here).
Let’s review the fresh hedge fund action encompassing AlarmCom Holdings Inc (NASDAQ:ALRM).
What have hedge funds been doing with AlarmCom Holdings Inc (NASDAQ:ALRM)?
Heading into the fourth quarter of 2018, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in ALRM over the last 13 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Brian Bares’s Bares Capital Management has the biggest position in AlarmCom Holdings Inc (NASDAQ:ALRM), worth close to $204.3 million, accounting for 5.7% of its total 13F portfolio. The second most bullish fund manager is Akre Capital Management, led by Charles Akre, holding a $34.5 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions comprise Peter Muller’s PDT Partners, Jeffrey Hoffner’s Engle Capital and Ken Griffin’s Citadel Investment Group.
Due to the fact that AlarmCom Holdings Inc (NASDAQ:ALRM) has witnessed a decline in interest from the aggregate hedge fund industry, it’s easy to see that there was a specific group of hedgies who were dropping their positions entirely by the end of the third quarter. Interestingly, Ken Grossman and Glen Schneider’s SG Capital Management cut the largest investment of all the hedgies tracked by Insider Monkey, comprising about $4.8 million in call options, and Frank Slattery’s Symmetry Peak Management was right behind this move, as the fund said goodbye to about $1.5 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 3 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to AlarmCom Holdings Inc (NASDAQ:ALRM). These stocks are First Midwest Bancorp Inc (NASDAQ:FMBI), HMS Holdings Corp. (NASDAQ:HMSY), Ormat Technologies, Inc. (NYSE:ORA), and Tech Data Corp (NASDAQ:TECD). This group of stocks’ market valuations resemble ALRM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FMBI | 8 | 67244 | -3 |
| HMSY | 16 | 65374 | 5 |
| ORA | 7 | 158115 | -1 |
| TECD | 20 | 171945 | 3 |
| Average | 12.75 | 115670 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $116 million. That figure was $259 million in ALRM’s case. Tech Data Corp (NASDAQ:TECD) is the most popular stock in this table. On the other hand Ormat Technologies, Inc. (NYSE:ORA) is the least popular one with only 7 bullish hedge fund positions. AlarmCom Holdings Inc (NASDAQ:ALRM) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard TECD might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
