Were Hedge Funds Right About Altair Engineering Inc. (ALTR)?

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Altair Engineering Inc. (NASDAQ:ALTR).

Altair Engineering Inc. (NASDAQ:ALTR) was in 18 hedge funds’ portfolios at the end of March. The all time high for this statistic is 18. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. ALTR investors should pay attention to an increase in activity from the world’s largest hedge funds lately. There were 16 hedge funds in our database with ALTR holdings at the end of December. Our calculations also showed that ALTR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

According to most traders, hedge funds are assumed to be unimportant, old financial vehicles of the past. While there are over 8000 funds in operation at present, Our researchers look at the elite of this group, around 850 funds. It is estimated that this group of investors shepherd the lion’s share of all hedge funds’ total asset base, and by tracking their top equity investments, Insider Monkey has determined many investment strategies that have historically exceeded the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Roger Ibbotson of Zebra Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 view the new hedge fund action encompassing Altair Engineering Inc. (NASDAQ:ALTR).

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

At the end of March, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in ALTR a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Matrix Capital Management held the most valuable stake in Altair Engineering Inc. (NASDAQ:ALTR), which was worth $322.6 million at the end of the fourth quarter. On the second spot was Impax Asset Management which amassed $147.7 million worth of shares. Alkeon Capital Management, ARK Investment Management, and Millennium Management 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 Matrix Capital Management allocated the biggest weight to Altair Engineering Inc. (NASDAQ:ALTR), around 3.72% of its 13F portfolio. Southport Management is also relatively very bullish on the stock, earmarking 1.16 percent of its 13F equity portfolio to ALTR.

With a general bullishness amongst the heavyweights, some big names have jumped into Altair Engineering Inc. (NASDAQ:ALTR) headfirst. Two Sigma Advisors, managed by John Overdeck and David Siegel, created the most outsized position in Altair Engineering Inc. (NASDAQ:ALTR). Two Sigma Advisors had $2.7 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also initiated a $0.7 million position during the quarter. The following funds were also among the new ALTR investors: Jonathan Dawson’s Southport Management and Roger Ibbotson’s Zebra Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Altair Engineering Inc. (NASDAQ:ALTR) but similarly valued. We will take a look at New Residential Investment Corp (NYSE:NRZ), Novanta Inc. (NASDAQ:NOVT), SailPoint Technologies Holdings, Inc. (NYSE:SAIL), Iovance Biotherapeutics, Inc. (NASDAQ:IOVA), Gates Industrial Corporation plc (NYSE:GTES), Bloom Energy Corporation (NYSE:BE), and FuelCell Energy, Inc. (NASDAQ:FCEL). This group of stocks’ market values match ALTR’s market value.

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As you can see these stocks had an average of 21.4 hedge funds with bullish positions and the average amount invested in these stocks was $443 million. That figure was $581 million in ALTR’s case. Iovance Biotherapeutics, Inc. (NASDAQ:IOVA) is the most popular stock in this table. On the other hand FuelCell Energy, Inc. (NASDAQ:FCEL) is the least popular one with only 13 bullish hedge fund positions. Altair Engineering Inc. (NASDAQ:ALTR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ALTR is 47.4. 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 negative signal and 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 28.5% in 2021 through July 23rd and surpassed the market again by 10.1 percentage points. Unfortunately ALTR wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); ALTR investors were disappointed as the stock returned 8.8% since the end of March (through 7/23) 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 most of these stocks already outperformed the market in 2021.

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

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