With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was AstroNova, Inc. (NASDAQ:ALOT).
Is ALOT a good stock to buy now? Prominent investors were becoming less confident. The number of bullish hedge fund positions went down by 4 recently. AstroNova, Inc. (NASDAQ:ALOT) was in 8 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 12. Our calculations also showed that ALOT isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
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 monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
David Harding of Winton Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with 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. Now we’re going to take a look at the fresh hedge fund action encompassing AstroNova, Inc. (NASDAQ:ALOT).
How have hedgies been trading AstroNova, Inc. (NASDAQ:ALOT)?
At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from the second quarter of 2020. By comparison, 6 hedge funds held shares or bullish call options in ALOT a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the number one position in AstroNova, Inc. (NASDAQ:ALOT). Royce & Associates has a $2.9 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is John W. Rogers of Ariel Investments, with a $2.4 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other members of the smart money that are bullish contain Renaissance Technologies, Peter Schliemann’s Rutabaga Capital Management and Ali Motamed’s Invenomic Capital Management. In terms of the portfolio weights assigned to each position Rutabaga Capital Management allocated the biggest weight to AstroNova, Inc. (NASDAQ:ALOT), around 0.52% of its 13F portfolio. Invenomic Capital Management is also relatively very bullish on the stock, designating 0.18 percent of its 13F equity portfolio to ALOT.
Judging by the fact that AstroNova, Inc. (NASDAQ:ALOT) has faced a decline in interest from the aggregate hedge fund industry, logic holds that there exists a select few hedgies that decided to sell off their positions entirely in the third quarter. Intriguingly, Bradley Louis Radoff’s Fondren Management cut the biggest position of all the hedgies watched by Insider Monkey, worth close to $0.2 million in stock, and David Harding’s Winton Capital Management was right behind this move, as the fund dropped about $0.2 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 4 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as AstroNova, Inc. (NASDAQ:ALOT) but similarly valued. These stocks are Proteostasis Therapeutics, Inc. (NASDAQ:PTI), Fauquier Bankshares, Inc. (NASDAQ:FBSS), Smart Sand, Inc. (NASDAQ:SND), Digital Ally, Inc. (NASDAQ:DGLY), Canterbury Park Holding Corporation (NASDAQ:CPHC), Jupai Holdings Limited (NYSE:JP), and Nicholas Financial, Inc. (NASDAQ:NICK). All of these stocks’ market caps are closest to ALOT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PTI | 5 | 3545 | -1 |
| FBSS | 2 | 5457 | 0 |
| SND | 5 | 2192 | -3 |
| DGLY | 1 | 411 | -2 |
| CPHC | 1 | 5301 | 0 |
| JP | 1 | 261 | -1 |
| NICK | 3 | 19199 | 0 |
| Average | 2.6 | 5195 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.6 hedge funds with bullish positions and the average amount invested in these stocks was $5 million. That figure was $9 million in ALOT’s case. Proteostasis Therapeutics, Inc. (NASDAQ:PTI) is the most popular stock in this table. On the other hand Digital Ally, Inc. (NASDAQ:DGLY) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks AstroNova, Inc. (NASDAQ:ALOT) is more popular among hedge funds. Our overall hedge fund sentiment score for ALOT is 71. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 31.6% in 2020 through December 2nd but still managed to beat the market by 16 percentage points. Hedge funds were also right about betting on ALOT as the stock returned 27.9% since the end of September (through 12/2) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Follow Astronova Inc. (NASDAQ:ALOT)
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Disclosure: None. This article was originally published at Insider Monkey.
