We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 835 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is AlarmCom Holdings Inc (NASDAQ:ALRM), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is AlarmCom Holdings Inc (NASDAQ:ALRM) ready to rally soon? Prominent investors are betting on the stock. The number of bullish hedge fund positions advanced by 7 recently. Our calculations also showed that ALRM isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
At the moment there are dozens of methods stock traders use to value their holdings. Two of the less utilized methods are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the best money managers can outclass the S&P 500 by a significant margin (see the details here).
Ken Fisher of Fisher Asset Management
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the latest hedge fund action encompassing AlarmCom Holdings Inc (NASDAQ:ALRM).
What does smart money think about AlarmCom Holdings Inc (NASDAQ:ALRM)?
At the end of the fourth quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards ALRM over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Akre Capital Management, managed by Charles Akre, holds the number one position in AlarmCom Holdings Inc (NASDAQ:ALRM). Akre Capital Management has a $69.1 million position in the stock, comprising 0.6% of its 13F portfolio. Sitting at the No. 2 spot is Bares Capital Management, led by Brian Bares, holding a $65.5 million position; 1.8% of its 13F portfolio is allocated to the company. Remaining peers that are bullish encompass William C. Martin’s Raging Capital Management, Bruce Emery’s Greenvale Capital and Ken Fisher’s Fisher Asset Management. In terms of the portfolio weights assigned to each position Greenvale Capital allocated the biggest weight to AlarmCom Holdings Inc (NASDAQ:ALRM), around 7.95% of its 13F portfolio. Raging Capital Management is also relatively very bullish on the stock, setting aside 5.78 percent of its 13F equity portfolio to ALRM.
Consequently, key hedge funds were leading the bulls’ herd. Raging Capital Management, managed by William C. Martin, established the most valuable position in AlarmCom Holdings Inc (NASDAQ:ALRM). Raging Capital Management had $33.3 million invested in the company at the end of the quarter. Bruce Emery’s Greenvale Capital also initiated a $32.2 million position during the quarter. The following funds were also among the new ALRM investors: Minhua Zhang’s Weld Capital Management, George McCabe’s Portolan Capital Management, and Ali Motamed’s Invenomic Capital Management.
Let’s go over hedge fund activity in other stocks similar to AlarmCom Holdings Inc (NASDAQ:ALRM). These stocks are Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD), Cal-Maine Foods Inc (NASDAQ:CALM), SPX FLOW, Inc. (NASDAQ:FLOW), and Baozun Inc (NASDAQ:BZUN). All of these stocks’ market caps match ALRM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IRWD | 28 | 416880 | 3 |
| CALM | 15 | 172532 | -6 |
| FLOW | 16 | 212749 | 4 |
| BZUN | 15 | 44965 | -2 |
| Average | 18.5 | 211782 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $212 million. That figure was $260 million in ALRM’s case. Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) is the most popular stock in this table. On the other hand Cal-Maine Foods Inc (NASDAQ:CALM) is the least popular one with only 15 bullish hedge fund positions. AlarmCom Holdings Inc (NASDAQ:ALRM) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but still beat the market by 4.2 percentage points. Hedge funds were also right about betting on ALRM as the stock returned -3.9% in 2020 (through April 6th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
