The Insider Monkey team has completed processing the quarterly 13F filings for the June quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards ALLETE Inc (NYSE:ALE).
Is ALLETE Inc (NYSE:ALE) the right investment to pursue these days? Money managers were reducing their bets on the stock. The number of bullish hedge fund positions shrunk by 6 lately. ALLETE Inc (NYSE:ALE) was in 10 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 25. Our calculations also showed that ALE isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 16 hedge funds in our database with ALE positions at the end of the first quarter.
To most market participants, hedge funds are assumed to be slow, outdated financial tools of years past. While there are more than 8000 funds with their doors open at the moment, Our researchers hone in on the leaders of this club, approximately 850 funds. These money managers direct bulk of all hedge funds’ total asset base, and by observing their highest performing investments, Insider Monkey has unearthed several investment strategies that have historically outstripped Mr. Market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website .
Bernard Horn of Polaris Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to take a look at the new hedge fund action surrounding ALLETE Inc (NYSE:ALE).
Do Hedge Funds Think ALE Is A Good Stock To Buy Now?
At Q2’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -38% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in ALE over the last 24 quarters. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
Among these funds, Polaris Capital Management held the most valuable stake in ALLETE Inc (NYSE:ALE), which was worth $51.2 million at the end of the second quarter. On the second spot was Millennium Management which amassed $12.6 million worth of shares. Tudor Investment Corp, Autonomy Capital, and Ancora Advisors 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 Polaris Capital Management allocated the biggest weight to ALLETE Inc (NYSE:ALE), around 1.65% of its 13F portfolio. Autonomy Capital is also relatively very bullish on the stock, earmarking 0.49 percent of its 13F equity portfolio to ALE.
Because ALLETE Inc (NYSE:ALE) has faced bearish sentiment from the smart money, it’s safe to say that there is a sect of hedge funds who sold off their positions entirely last quarter. It’s worth mentioning that Chuck Royce’s Royce & Associates cut the largest stake of the 750 funds watched by Insider Monkey, valued at about $6.3 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund dumped about $3.3 million worth. These moves are important to note, as total hedge fund interest fell by 6 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to ALLETE Inc (NYSE:ALE). We will take a look at Kirby Corporation (NYSE:KEX), Brookfield Business Partners L.P. (NYSE:BBU), Installed Building Products Inc (NYSE:IBP), Camping World Holdings, Inc. (NYSE:CWH), Spectrum Brands Holdings, Inc. (NYSE:SPB), Shutterstock Inc (NYSE:SSTK), and Vonage Holdings Corp. (NASDAQ:VG). This group of stocks’ market valuations resemble ALE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KEX | 21 | 583682 | -2 |
| BBU | 4 | 24531 | 1 |
| IBP | 12 | 55396 | -9 |
| CWH | 20 | 292507 | -4 |
| SPB | 35 | 578244 | -2 |
| SSTK | 18 | 214408 | 0 |
| VG | 29 | 708094 | -7 |
| Average | 19.9 | 350980 | -3.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.9 hedge funds with bullish positions and the average amount invested in these stocks was $351 million. That figure was $73 million in ALE’s case. Spectrum Brands Holdings, Inc. (NYSE:SPB) is the most popular stock in this table. On the other hand Brookfield Business Partners L.P. (NYSE:BBU) is the least popular one with only 4 bullish hedge fund positions. ALLETE Inc (NYSE:ALE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ALE is 20.7. 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 negative signal and 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 25.7% in 2021 through September 27th and surpassed the market again by 6.2 percentage points. Unfortunately ALE wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); ALE investors were disappointed as the stock returned -13.8% since the end of June (through 9/27) 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 most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.
