Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ complex research processes to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we pay special attention to the hedge fund activity in the small-cap space. Nevertheless, it is also possible to find underpriced large-cap stocks by following the hedge funds’ moves.
Is Alteryx, Inc. (NYSE:AYX) a buy right now? Investors who are in the know are in an optimistic mood. The number of bullish hedge fund positions went up by 7 lately. Our calculations also showed that AYX isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s go over the key hedge fund action encompassing Alteryx, Inc. (NYSE:AYX).
What does smart money think about Alteryx, Inc. (NYSE:AYX)?
Heading into the third quarter of 2019, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a change of 23% from the first quarter of 2019. By comparison, 18 hedge funds held shares or bullish call options in AYX a year ago. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
The largest stake in Alteryx, Inc. (NYSE:AYX) was held by Abdiel Capital Advisors, which reported holding $438 million worth of stock at the end of March. It was followed by Whale Rock Capital Management with a $227.3 million position. Other investors bullish on the company included D E Shaw, Polar Capital, and Alkeon Capital Management.
As industrywide interest jumped, key hedge funds were breaking ground themselves. Corvex Capital, managed by Keith Meister, initiated the biggest position in Alteryx, Inc. (NYSE:AYX). Corvex Capital had $35.8 million invested in the company at the end of the quarter. James Crichton’s Hitchwood Capital Management also initiated a $32.7 million position during the quarter. The other funds with brand new AYX positions are Brian Ashford-Russell and Tim Woolley’s Polar Capital, Panayotis Takis Sparaggis’s Alkeon Capital Management, and Israel Englander’s Millennium Management.
Let’s also examine hedge fund activity in other stocks similar to Alteryx, Inc. (NYSE:AYX). These stocks are Gardner Denver Holdings, Inc. (NYSE:GDI), LINE Corporation (NYSE:LN), Flowserve Corporation (NYSE:FLS), and GrubHub Inc (NYSE:GRUB). All of these stocks’ market caps are similar to AYX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GDI | 24 | 293865 | 1 |
| LN | 9 | 46156 | 4 |
| FLS | 26 | 343957 | 6 |
| GRUB | 32 | 808367 | 0 |
| Average | 22.75 | 373086 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $373 million. That figure was $1210 million in AYX’s case. GrubHub Inc (NYSE:GRUB) is the most popular stock in this table. On the other hand LINE Corporation (NYSE:LN) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Alteryx, Inc. (NYSE:AYX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately AYX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AYX were disappointed as the stock returned -1.5% during the third quarter 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 in Q3.
Disclosure: None. This article was originally published at Insider Monkey.
