Individual investors do not usually have the necessary resources to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis that leads to poor returns on aggregate. Since stock returns aren’t usually evenly distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving the S&P 500 Index’s returns in recent years), more than 50% of stocks in the S&P 500 underperform the benchmark. Hence, if you randomly pick a stock, there is a greater than 50% chance that you’ll fail to beat the market. At the same time, the 30 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated a return of 15.1% over the last 12 months (vs. a 5.6% gain for the SPY), with 53% of these stocks outperforming the benchmark. Hedge funds do make some bad bets but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Allegiant Travel Company (NASDAQ:ALGT).
Hedge fund ownership of Allegiant rebounded in Q2 after nearly as sharp of a fall in the first quarter. 15 of the hedge funds tracked by Insider Monkey were long the airline, which included new positions being opened by Francis Chou’s Chou Associates and David Harding’s Winton Capital. Allegiant is also on the verge of getting into the hospitality industry with a lavish resort being built in Florida for $420 million. The company is aiming to take a bigger slice of travelers’ budgets, as opposed to just dropping them off in Florida and letting Walt Disney Co (NYSE:DIS) take the rest of their money. President John Redmond is enthusiastic about the company’s chances, buying 23,000 shares last week, which ranked second on our list of The 25 Biggest Insider Purchases in October.
In today’s marketplace there are numerous methods shareholders have at their disposal to analyze their holdings. Two of the most innovative methods are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the top hedge fund managers can outperform the market by a solid amount (see the details here).
Francis Chou of Chou Associates Management
Let’s take a gander at the latest hedge fund action encompassing Allegiant Travel Company (NASDAQ:ALGT).
How are hedge funds trading Allegiant Travel Company (NASDAQ:ALGT)?
At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a jump of 36% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in ALGT over the last 6 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, First Pacific Advisors LLC, managed by Robert Rodriguez and Steven Romick, holds the biggest position in Allegiant Travel Company (NASDAQ:ALGT). First Pacific Advisors LLC has a $70.8 million position in the stock, comprising 0.5% of its 13F portfolio. Coming in second is Diamond Hill Capital, led by Ric Dillon, holding a $58.2 million position; 0.3% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that are bullish consist of Roger Ibbotson’s Zebra Capital Management and Chuck Royce’s Royce & Associates.
As one would reasonably expect, some big names were leading the bulls’ herd. Chou Associates Management, managed by Francis Chou, created the most outsized position in Allegiant Travel Company (NASDAQ:ALGT), valued at $600,000. Matthew Tewksbury’s Stevens Capital Management also initiated a $419,000 position during the quarter. The other funds with new positions in the stock were Israel Englander’s Millennium Management, Dmitry Balyasny’s Balyasny Asset Management, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s check out hedge fund activity in other stocks similar to Allegiant Travel Company (NASDAQ:ALGT). We will take a look at Cyberark Software Ltd (NASDAQ:CYBR), Puma Biotechnology Inc (NYSE:PBYI), Convergys Corporation (NYSE:CVG), and Canada Goose Holdings Inc. (NYSE:GOOS). All of these stocks’ market caps resemble ALGT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CYBR | 17 | 435768 | 3 |
| PBYI | 22 | 741639 | -2 |
| CVG | 16 | 270861 | 0 |
| GOOS | 26 | 208210 | 6 |
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $414 million. That figure was $245 million in ALGT’s case. Canada Goose Holdings Inc. (NYSE:GOOS) is the most popular stock in this table. On the other hand Convergys Corporation (NYSE:CVG) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Allegiant Travel Company (NASDAQ:ALGT) is even less popular than CVG. Hedge funds aren’t overly fond of this stock in relation to other companies analyzed in this article, but they are growing more bullish, and leading insiders are also buying shares, so Allegiant may be worth looking at while shares remain discounted.
Disclosure: None. This article was originally published at Insider Monkey.
