The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on September 30th. We at Insider Monkey have made an extensive database of nearly 750 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Alarm.com Holdings, Inc. (NASDAQ:ALRM) based on those filings.
Alarm.com Holdings, Inc. (NASDAQ:ALRM) was in 18 hedge funds’ portfolios at the end of September. ALRM has experienced a decrease in support from the world’s most elite money managers recently. There were 19 hedge funds in our database with ALRM holdings at the end of the previous quarter. Our calculations also showed that ALRM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most shareholders, hedge funds are seen as underperforming, old investment vehicles of years past. While there are greater than 8000 funds with their doors open at present, Our researchers hone in on the leaders of this club, approximately 750 funds. These investment experts orchestrate the majority of the smart money’s total capital, and by following their best picks, Insider Monkey has brought to light a number of investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Joel Greenblatt of Gotham Asset Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals to come up with ideas. Let’s analyze the recent hedge fund action regarding Alarm.com Holdings, Inc. (NASDAQ:ALRM).
How are hedge funds trading Alarm.com Holdings, Inc. (NASDAQ:ALRM)?
Heading into the fourth quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ALRM over the last 17 quarters. So, let’s find 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 $63.8 million at the end of the third quarter. On the second spot was Bares Capital Management which amassed $56.1 million worth of shares. Fisher Asset Management, Arrowstreet Capital, and Gotham 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 Bares Capital Management allocated the biggest weight to Alarm.com Holdings, Inc. (NASDAQ:ALRM), around 1.68% of its 13F portfolio. Akre Capital Management is also relatively very bullish on the stock, dishing out 0.63 percent of its 13F equity portfolio to ALRM.
Since Alarm.com Holdings, Inc. (NASDAQ:ALRM) has witnessed a decline in interest from the smart money, it’s easy to see that there exists a select few hedge funds that elected to cut their positions entirely last quarter. Interestingly, Renaissance Technologies said goodbye to the largest stake of all the hedgies watched by Insider Monkey, valued at close to $11.1 million in call options, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund said goodbye to about $2 million worth. These transactions are important to note, as total hedge fund interest fell by 1 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Alarm.com Holdings, Inc. (NASDAQ:ALRM) but similarly valued. We will take a look at Cadence Bancorporation (NYSE:CADE), Greif, Inc. (NYSE:GEF), CareTrust REIT, Inc. (NASDAQ:CTRE), and Select Medical Holdings Corporation (NYSE:SEM). This group of stocks’ market values resemble ALRM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CADE | 20 | 105054 | 2 |
| GEF | 14 | 76629 | -7 |
| CTRE | 15 | 106967 | -5 |
| SEM | 18 | 110991 | 1 |
| Average | 16.75 | 99910 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $100 million. That figure was $162 million in ALRM’s case. Cadence Bancorporation (NYSE:CADE) is the most popular stock in this table. On the other hand Greif, Inc. (NYSE:GEF) is the least popular one with only 14 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. 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ALRM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ALRM were disappointed as the stock returned -6.5% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
