A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31st, so let’s proceed with the discussion of the hedge fund sentiment on Allegion plc (NYSE:ALLE).
Is ALLE stock a buy? The best stock pickers were in a bearish mood. The number of long hedge fund positions were cut by 5 lately. Allegion plc (NYSE:ALLE) was in 27 hedge funds’ portfolios at the end of December. The all time high for this statistic is 36. Our calculations also showed that ALLE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 32 hedge funds in our database with ALLE positions at the end of the third quarter.
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. Hedge funds have more than $3 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
Michael Gelband of ExodusPoint Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 website. With all of this in mind let’s analyze the new hedge fund action surrounding Allegion plc (NYSE:ALLE).
Do Hedge Funds Think ALLE Is A Good Stock To Buy Now?
At Q4’s end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -16% from the previous quarter. On the other hand, there were a total of 25 hedge funds with a bullish position in ALLE a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
Among these funds, Ako Capital held the most valuable stake in Allegion plc (NYSE:ALLE), which was worth $248.4 million at the end of the fourth quarter. On the second spot was Citadel Investment Group which amassed $179.9 million worth of shares. Intermede Investment Partners, Bristol Gate Capital Partners, and D E Shaw 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 Bristol Gate Capital Partners allocated the biggest weight to Allegion plc (NYSE:ALLE), around 4.79% of its 13F portfolio. Intermede Investment Partners is also relatively very bullish on the stock, designating 3.48 percent of its 13F equity portfolio to ALLE.
Since Allegion plc (NYSE:ALLE) has experienced falling interest from hedge fund managers, we can see that there exists a select few funds that decided to sell off their entire stakes last quarter. Intriguingly, Brian Sheehy’s Iszo Capital sold off the largest stake of all the hedgies tracked by Insider Monkey, worth an estimated $11.7 million in stock. Javier Velazquez’s fund, Albar Capital, also sold off its stock, about $11.7 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 5 funds last quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Allegion plc (NYSE:ALLE) but similarly valued. These stocks are Lumen Technologies, Inc. (NYSE:LUMN), Advance Auto Parts, Inc. (NYSE:AAP), Zynga Inc (NASDAQ:ZNGA), News Corp (NASDAQ:NWSA), Teva Pharmaceutical Industries Limited (NYSE:TEVA), Cna Financial Corporation (NYSE:CNA), and News Corp (NASDAQ:NWS). This group of stocks’ market caps are closest to ALLE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LUMN | 29 | 772132 | -2 |
| AAP | 36 | 1352541 | -6 |
| ZNGA | 52 | 1002909 | 4 |
| NWSA | 32 | 703034 | 1 |
| TEVA | 26 | 916076 | -7 |
| CNA | 16 | 60793 | -1 |
| NWS | 11 | 65562 | -3 |
| Average | 28.9 | 696150 | -2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.9 hedge funds with bullish positions and the average amount invested in these stocks was $696 million. That figure was $846 million in ALLE’s case. Zynga Inc (NASDAQ:ZNGA) is the most popular stock in this table. On the other hand News Corp (NASDAQ:NWS) is the least popular one with only 11 bullish hedge fund positions. Allegion plc (NYSE:ALLE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ALLE is 42. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. A small number of hedge funds were also right about betting on ALLE as the stock returned 14.1% since the end of the fourth quarter (through 4/19) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
