In this article we will check out the progression of hedge fund sentiment towards Alio Gold Inc. (NYSE:ALO) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Hedge fund interest in Alio Gold Inc. (NYSE:ALO) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as PolarityTE, Inc. (NASDAQ:PTE), Opiant Pharmaceuticals, Inc. (NASDAQ:OPNT), and Envision Solar International, Inc. (NASDAQ:EVSI) to gather more data points. Our calculations also showed that ALO isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 44 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ken Griffin of Citadel Investment Group
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. 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 let’s take a gander at the key hedge fund action regarding Alio Gold Inc. (NYSE:ALO).
How are hedge funds trading Alio Gold Inc. (NYSE:ALO)?
Heading into the second quarter of 2020, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ALO over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Alio Gold Inc. (NYSE:ALO), with a stake worth $0.9 million reported as of the end of September. Trailing Renaissance Technologies was Sun Valley Gold, which amassed a stake valued at $0.6 million. Citadel Investment Group was 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 Sun Valley Gold allocated the biggest weight to Alio Gold Inc. (NYSE:ALO), around 0.05% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.0008 percent of its 13F equity portfolio to ALO.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s now take a look at hedge fund activity in other stocks similar to Alio Gold Inc. (NYSE:ALO). These stocks are PolarityTE, Inc. (NASDAQ:PTE), Opiant Pharmaceuticals, Inc. (NASDAQ:OPNT), Envision Solar International, Inc. (NASDAQ:EVSI), and Soligenix, Inc. (NASDAQ:SNGX). All of these stocks’ market caps match ALO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PTE | 11 | 4526 | 3 |
| OPNT | 4 | 7261 | 1 |
| EVSI | 4 | 3003 | 1 |
| SNGX | 3 | 2246 | 1 |
| Average | 5.5 | 4259 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.5 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $2 million in ALO’s case. PolarityTE, Inc. (NASDAQ:PTE) is the most popular stock in this table. On the other hand Soligenix, Inc. (NASDAQ:SNGX) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Alio Gold Inc. (NYSE:ALO) is even less popular than SNGX. Hedge funds clearly dropped the ball on ALO as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd and still beat the market by 15.6 percentage points. A small number of hedge funds were also right about betting on ALO as the stock returned 89.8% so far in the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
