Is The Allstate Corporation (ALL) Going to Burn These Hedge Funds?

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about The Allstate Corporation (NYSE:ALL).

Is The Allstate Corporation (NYSE:ALL) a buy here? The best stock pickers were in a pessimistic mood. The number of bullish hedge fund bets dropped by 8 lately. The Allstate Corporation (NYSE:ALL) was in 33 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 48. Our calculations also showed that ALL isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Cliff Asness of AQR Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let’s check out the fresh hedge fund action regarding The Allstate Corporation (NYSE:ALL).

Do Hedge Funds Think ALL Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ALL over the last 24 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

More specifically, AQR Capital Management was the largest shareholder of The Allstate Corporation (NYSE:ALL), with a stake worth $385.5 million reported as of the end of June. Trailing AQR Capital Management was Point State Capital, which amassed a stake valued at $154.6 million. Millennium Management, Arrowstreet Capital, and Point State Capital 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 Strycker View Capital allocated the biggest weight to The Allstate Corporation (NYSE:ALL), around 5.25% of its 13F portfolio. Point State Capital is also relatively very bullish on the stock, setting aside 2.67 percent of its 13F equity portfolio to ALL.

Seeing as The Allstate Corporation (NYSE:ALL) has experienced falling interest from the smart money, logic holds that there was a specific group of money managers that elected to cut their positions entirely in the second quarter. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace LLP said goodbye to the largest position of the “upper crust” of funds monitored by Insider Monkey, totaling close to $26.8 million in stock, and Paul Tudor Jones’s Tudor Investment Corp was right behind this move, as the fund sold off about $6.6 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 8 funds in the second quarter.

Let’s now take a look at hedge fund activity in other stocks similar to The Allstate Corporation (NYSE:ALL). These stocks are Fortinet Inc (NASDAQ:FTNT), Paychex, Inc. (NASDAQ:PAYX), Rocket Companies, Inc. (NYSE:RKT), Manulife Financial Corporation (NYSE:MFC), Cadence Design Systems Inc (NASDAQ:CDNS), The Travelers Companies Inc (NYSE:TRV), and Phillips 66 (NYSE:PSX). All of these stocks’ market caps resemble ALL’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.4 hedge funds with bullish positions and the average amount invested in these stocks was $673 million. That figure was $924 million in ALL’s case. The Travelers Companies Inc (NYSE:TRV) is the most popular stock in this table. On the other hand Rocket Companies, Inc. (NYSE:RKT) is the least popular one with only 13 bullish hedge fund positions. The Allstate Corporation (NYSE:ALL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ALL is 65.2. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately ALL wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ALL were disappointed as the stock returned -2.2% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.