Is ALLETE Inc (NYSE:ALE) a cheap investment now? Prominent investors are becoming less hopeful. The number of bullish hedge fund positions shrunk by 1 lately.
To most market participants, hedge funds are viewed as underperforming, old financial vehicles of years past. While there are over 8000 funds in operation at the moment, we hone in on the crème de la crème of this group, close to 450 funds. It is widely believed that this group has its hands on most of the hedge fund industry’s total asset base, and by watching their highest performing equity investments, we have come up with a few investment strategies that have historically outperformed Mr. Market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 24 percentage points in 7 months (explore the details and some picks here).
Equally as important, positive insider trading sentiment is a second way to parse down the world of equities. As the old adage goes: there are lots of incentives for a corporate insider to sell shares of his or her company, but only one, very clear reason why they would initiate a purchase. Various academic studies have demonstrated the impressive potential of this strategy if piggybackers understand what to do (learn more here).
Keeping this in mind, we’re going to take a peek at the latest action encompassing ALLETE Inc (NYSE:ALE).
How have hedgies been trading ALLETE Inc (NYSE:ALE)?
At year’s end, a total of 8 of the hedge funds we track held long positions in this stock, a change of -11% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their holdings meaningfully.
Of the funds we track, Polaris Capital Management, managed by Bernard Horn, holds the largest position in ALLETE Inc (NYSE:ALE). Polaris Capital Management has a $40.3 million position in the stock, comprising 2.9% of its 13F portfolio. Sitting at the No. 2 spot is Adage Capital Management, managed by Phill Gross and Robert Atchinson, which held a $36.9 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism include Chuck Royce’s Royce & Associates, Israel Englander’s Millennium Management and Mario Gabelli’s GAMCO Investors.
Due to the fact that ALLETE Inc (NYSE:ALE) has experienced declining sentiment from the smart money, it’s safe to say that there was a specific group of funds who sold off their positions entirely last quarter. It’s worth mentioning that Tim Flannery’s Copia Capital cut the biggest position of the “upper crust” of funds we track, totaling about $2.7 million in stock., and Jim Simons of Renaissance Technologies was right behind this move, as the fund sold off about $1.5 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds last quarter.
What do corporate executives and insiders think about ALLETE Inc (NYSE:ALE)?
Bullish insider trading is best served when the company we’re looking at has experienced transactions within the past 180 days. Over the latest 180-day time period, ALLETE Inc (NYSE:ALE) has seen zero unique insiders buying, and 7 insider sales (see the details of insider trades here).
Let’s check out hedge fund and insider activity in other stocks similar to ALLETE Inc (NYSE:ALE). These stocks are MGE Energy, Inc. (NASDAQ:MGEE), Vectren Corporation (NYSE:VVC), NorthWestern Corp (NYSE:NWE), Avista Corp (NYSE:AVA), and PNM Resources, Inc. (NYSE:PNM). All of these stocks are in the diversified utilities industry and their market caps are closest to ALE’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| MGE Energy, Inc. (NASDAQ:MGEE) | 6 | 2 | 0 |
| Vectren Corporation (NYSE:VVC) | 9 | 0 | 0 |
| NorthWestern Corp (NYSE:NWE) | 9 | 1 | 0 |
| Avista Corp (NYSE:AVA) | 10 | 0 | 5 |
| PNM Resources, Inc. (NYSE:PNM) | 13 | 0 | 6 |
With the results exhibited by the aforementioned research, everyday investors must always monitor hedge fund and insider trading sentiment, and ALLETE Inc (NYSE:ALE) shareholders fit into this picture quite nicely.
