The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Allison Transmission Holdings Inc (NYSE:ALSN) from the perspective of those elite funds.
Hedge fund interest in Allison Transmission Holdings Inc (NYSE:ALSN) 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 Embraer SA (ADR) (NYSE:ERJ), Transocean LTD (NYSE:RIG), and EQT Midstream Partners LP (NYSE:EQM) to gather more data points.
Follow Allison Transmission Holdings Inc (NYSE:ALSN)
Follow Allison Transmission Holdings Inc (NYSE:ALSN)
If you’d ask most shareholders, hedge funds are perceived as slow, old investment vehicles of yesteryear. While there are over 8000 funds trading today, Our researchers look at the masters of this club, approximately 700 funds. These money managers command bulk of all hedge funds’ total capital, and by tailing their first-class picks, Insider Monkey has formulated a number of investment strategies that have historically outstripped the market. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
Keeping this in mind, we’re going to take a glance at the key action surrounding Allison Transmission Holdings Inc (NYSE:ALSN).
Hedge fund activity in Allison Transmission Holdings Inc (NYSE:ALSN)
At the end of September, a total of 40 of the hedge funds tracked by Insider Monkey held long positions in this stock, flat over the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Jeffrey Ubben’s ValueAct Capital has the biggest position in Allison Transmission Holdings Inc (NYSE:ALSN), worth close to $510.5 million, corresponding to 3% of its total 13F portfolio. On ValueAct Capital’s heels is D E Shaw, with a $270.9 million position; 0.4% of its 13F portfolio is allocated to the stock. Some other professional money managers that hold long positions include Farallon Capital, William Crowley, William Harker, and Stephen Blass’ Ashe Capital, and Jeffrey Gates’s Gates Capital Management.
Since Allison Transmission Holdings Inc (NYSE:ALSN) has faced a declination in interest from hedge fund managers, it’s safe to say that there lies a certain “tier” of funds that decided to sell off their full holdings by the end of the third quarter. It’s worth mentioning that Larry Foley and Paul Farrell’s Bronson Point Partners said goodbye to the largest stake of the “upper crust” of funds followed by Insider Monkey, worth an estimated $14.7 million in stock, and Anand Parekh’s Alyeska Investment Group was right behind this move, as the fund sold off about $2.9 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks similar to Allison Transmission Holdings Inc (NYSE:ALSN). These stocks are Embraer SA (ADR) (NYSE:ERJ), Transocean LTD (NYSE:RIG), EQT Midstream Partners LP (NYSE:EQM), and Marvell Technology Group Ltd. (NASDAQ:MRVL). This group of stocks’ market values resembles Allison Transmission Holdings Inc (NYSE:ALSN)’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ERJ | 4 | 100735 | -5 |
| RIG | 37 | 612473 | 5 |
| EQM | 13 | 73139 | 1 |
| MRVL | 31 | 373271 | -5 |
As you can see, these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $290 million. That figure was $1.61 billion in Allison Transmission Holdings Inc (NYSE:ALSN)’s case. Transocean LTD (NYSE:RIG) is the most popular stock in this table. On the other hand, Embraer SA (ADR) (NYSE:ERJ) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks, Allison Transmission Holdings Inc (NYSE:ALSN) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
