We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Allegion plc (NYSE:ALLE).
Allegion plc (NYSE:ALLE) investors should pay attention to a decrease in enthusiasm from smart money recently. Allegion plc (NYSE:ALLE) was in 32 hedge funds’ portfolios at the end of September. The all time high for this statistic is 37. There were 37 hedge funds in our database with ALLE positions at the end of the second quarter. Our calculations also showed that ALLE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Clint Carlson of Carlson Capital
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. Keeping this in mind let’s check out the new hedge fund action regarding Allegion plc (NYSE:ALLE).
Do Hedge Funds Think ALLE Is A Good Stock To Buy Now?
At third quarter’s end, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ALLE over the last 25 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
The largest stake in Allegion plc (NYSE:ALLE) was held by Ako Capital, which reported holding $263.1 million worth of stock at the end of September. It was followed by Intermede Investment Partners with a $144.3 million position. Other investors bullish on the company included Millennium Management, Bristol Gate Capital Partners, and 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, earmarking 4.34 percent of its 13F equity portfolio to ALLE.
Judging by the fact that Allegion plc (NYSE:ALLE) has witnessed a decline in interest from the aggregate hedge fund industry, it’s safe to say that there is a sect of fund managers who sold off their full holdings by the end of the third quarter. Interestingly, Ken Griffin’s Citadel Investment Group dropped the biggest stake of all the hedgies monitored by Insider Monkey, valued at an estimated $144.1 million in stock, and Javier Velazquez’s Albar Capital was right behind this move, as the fund said goodbye to about $36.8 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 5 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Allegion plc (NYSE:ALLE). These stocks are Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF), Qiagen NV (NASDAQ: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 caps resemble ALLE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KOF | 6 | 460706 | -3 |
| QGEN | 21 | 599491 | -1 |
| BRKR | 31 | 552162 | 0 |
| GDDY | 37 | 2299629 | -2 |
| FMC | 28 | 349943 | -5 |
| IHG | 9 | 51166 | 3 |
| TREX | 21 | 222428 | -4 |
| Average | 21.9 | 647932 | -1.7 |
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 28.6% in 2021 through November 30th and beat the market again by 5.6 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 -6.5% since the end of September (through 11/30) 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 many of these stocks already outperformed the market since 2019.
Follow Allegion Plc (NYSE:ALLE)
Follow Allegion Plc (NYSE:ALLE)
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Disclosure: None. This article was originally published at Insider Monkey.
