How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding The Allstate Corporation (NYSE:ALL).
The Allstate Corporation (NYSE:ALL) was in 44 hedge funds’ portfolios at the end of September. ALL has experienced an increase in enthusiasm from smart money recently. There were 37 hedge funds in our database with ALL holdings at the end of the previous quarter. Our calculations also showed that ALL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings, see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Noam Gottesman of GLG Partners
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to go over the recent hedge fund action regarding The Allstate Corporation (NYSE:ALL).
How have hedgies been trading The Allstate Corporation (NYSE:ALL)?
At the end of the third quarter, a total of 44 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from the second quarter of 2019. By comparison, 34 hedge funds held shares or bullish call options in ALL a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Cliff Asness’s AQR Capital Management has the biggest position in The Allstate Corporation (NYSE:ALL), worth close to $654.2 million, accounting for 0.8% of its total 13F portfolio. The second most bullish fund manager is GLG Partners, managed by Noam Gottesman, which holds a $237.1 million position; 0.9% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions include Ken Griffin’s Citadel Investment Group, John Overdeck and David Siegel’s Two Sigma Advisors and Renaissance Technologies. In terms of the portfolio weights assigned to each position RR Partners allocated the biggest weight to The Allstate Corporation (NYSE:ALL), around 3.35% of its portfolio. Prana Capital Management is also relatively very bullish on the stock, dishing out 2.27 percent of its 13F equity portfolio to ALL.
As industrywide interest jumped, specific money managers have jumped into The Allstate Corporation (NYSE:ALL) headfirst. ExodusPoint Capital, managed by Michael Gelband, initiated the most outsized position in The Allstate Corporation (NYSE:ALL). ExodusPoint Capital had $5.2 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also initiated a $3.3 million position during the quarter. The following funds were also among the new ALL investors: James Dondero’s Highland Capital Management, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, and Jeffrey Talpins’s Element Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as The Allstate Corporation (NYSE:ALL) but similarly valued. These stocks are V.F. Corporation (NYSE:VFC), Dow Inc. (NYSE:DOW), Valero Energy Corporation (NYSE:VLO), and Ecopetrol S.A. (NYSE:EC). This group of stocks’ market values are closest to ALL’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VFC | 33 | 920216 | 1 |
| DOW | 32 | 285661 | -1 |
| VLO | 35 | 530355 | 0 |
| EC | 10 | 174854 | 0 |
| Average | 27.5 | 477772 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.5 hedge funds with bullish positions and the average amount invested in these stocks was $478 million. That figure was $1900 million in ALL’s case. Valero Energy Corporation (NYSE:VLO) is the most popular stock in this table. On the other hand Ecopetrol S.A. (NYSE:EC) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks The Allstate Corporation (NYSE:ALL) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately ALL wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ALL were disappointed as the stock returned 1.3% during the fourth quarter (through 11/22) 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
