Is Allison Transmission Holdings Inc (NYSE:ALSN) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy league graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Allison Transmission Holdings Inc (NYSE:ALSN) has seen an increase in hedge fund interest lately. ALSN was in 24 hedge funds’ portfolios at the end of September. There were 23 hedge funds in our database with ALSN positions at the end of the previous quarter. Our calculations also showed that ALSN isn’t among the 30 most popular stocks among hedge funds.
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 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a look at the recent hedge fund action regarding Allison Transmission Holdings Inc (NYSE:ALSN).
What does the smart money think about Allison Transmission Holdings Inc (NYSE:ALSN)?
At the end of the third quarter, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from the previous quarter. By comparison, 28 hedge funds held shares or bullish call options in ALSN heading into this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Allison Transmission Holdings Inc (NYSE:ALSN) was held by Ashe Capital, which reported holding $521.7 million worth of stock at the end of September. It was followed by SQ Advisors with a $451.2 million position. Other investors bullish on the company included D E Shaw, GLG Partners, and Two Sigma Advisors.
As aggregate interest increased, some big names have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the most outsized position in Allison Transmission Holdings Inc (NYSE:ALSN). Marshall Wace LLP had $12 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $4.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital, and Frederick DiSanto’s Ancora Advisors.
Let’s now review hedge fund activity in other stocks similar to Allison Transmission Holdings Inc (NYSE:ALSN). These stocks are The Stars Group Inc. (NASDAQ:TSG), Old Republic International Corporation (NYSE:ORI), Assurant, Inc. (NYSE:AIZ), and James Hardie Industries plc (NYSE:JHX). This group of stocks’ market values resemble ALSN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TSG | 52 | 910861 | -8 |
| ORI | 20 | 433634 | 1 |
| AIZ | 23 | 328481 | 9 |
| JHX | 2 | 4763 | 1 |
| Average | 24.25 | 419435 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.25 hedge funds with bullish positions and the average amount invested in these stocks was $419 million. That figure was $1.48 billion in ALSN’s case. The Stars Group Inc. (NASDAQ:TSG) is the most popular stock in this table. On the other hand James Hardie Industries plc (NYSE:JHX) is the least popular one with only 2 bullish hedge fund positions. Allison Transmission Holdings Inc (NYSE:ALSN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard TSG might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
