Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved, lost a third of its value since the end of July. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 30 S&P 500 stocks among hedge funds at the end of September 2018 yielded an average return of 6.7% year-to-date, vs. a gain of 2.6% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Allegiant Travel Company (NASDAQ:ALGT).
Allegiant Travel Company (NASDAQ:ALGT) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 15 hedge funds’ portfolios at the end of the third quarter of 2018. 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 DoubleLine Income Solutions Fund (NYSE:DSL), Spark Therapeutics Inc (NASDAQ:ONCE), and Appian Corporation (NASDAQ:APPN) to gather more data points.
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 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s take a look at the latest hedge fund action surrounding Allegiant Travel Company (NASDAQ:ALGT).
How have hedgies been trading Allegiant Travel Company (NASDAQ:ALGT)?
At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, representing no change from the previous quarter. By comparison, 14 hedge funds held shares or bullish call options in ALGT heading into this year. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
More specifically, PAR Capital Management was the largest shareholder of Allegiant Travel Company (NASDAQ:ALGT), with a stake worth $200.7 million reported as of the end of September. Trailing PAR Capital Management was First Pacific Advisors LLC, which amassed a stake valued at $70.4 million. Diamond Hill Capital, Renaissance Technologies, and Royce & Associates were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as Allegiant Travel Company (NASDAQ:ALGT) has faced declining sentiment from hedge fund managers, it’s safe to say that there was a specific group of money managers that slashed their positions entirely by the end of the third quarter. Interestingly, John Tompkins’s Tyvor Capital said goodbye to the biggest position of the 700 funds monitored by Insider Monkey, worth an estimated $0.6 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund cut about $0.6 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Allegiant Travel Company (NASDAQ:ALGT) but similarly valued. We will take a look at DoubleLine Income Solutions Fund (NYSE:DSL), Spark Therapeutics Inc (NASDAQ:ONCE), Appian Corporation (NASDAQ:APPN), and Renasant Corporation (NASDAQ:RNST). This group of stocks’ market values match ALGT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DSL | 2 | 17849 | 0 |
| ONCE | 21 | 341380 | 4 |
| APPN | 8 | 210557 | 4 |
| RNST | 17 | 50524 | 6 |
| Average | 12 | 155078 | 3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $155 million. That figure was $429 million in ALGT’s case. Spark Therapeutics Inc (NASDAQ:ONCE) is the most popular stock in this table. On the other hand DoubleLine Income Solutions Fund (NYSE:DSL) is the least popular one with only 2 bullish hedge fund positions. Allegiant Travel Company (NASDAQ:ALGT) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ONCE might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
