Where Do Hedge Funds Stand On Alleghany Corporation (Y)?

At Insider Monkey, we pore over the filings of nearly 866 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of March 31st. In this article, we will use that wealth of knowledge to determine whether or not Alleghany Corporation (NYSE:Y) makes for a good investment right now.

Alleghany Corporation (NYSE:Y) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 34 hedge funds’ portfolios at the end of the first quarter of 2021. Our calculations also showed that Y isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). 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 SEI Investments Company (NASDAQ:SEIC), Amedisys Inc (NASDAQ:AMED), and Gentex Corporation (NASDAQ:GNTX) to gather more data points.

At the moment there are tons of signals shareholders have at their disposal to grade their stock investments. A pair of the less utilized signals are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the best fund managers can trounce the market by a very impressive amount (see the details here). 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 .

John Overdeck of Two Sigma Advisors

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 battery 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. Now let’s take a look at the key hedge fund action surrounding Alleghany Corporation (NYSE:Y).

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

Heading into the second quarter of 2021, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the fourth quarter of 2020. By comparison, 25 hedge funds held shares or bullish call options in Y a year ago. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

More specifically, Polar Capital was the largest shareholder of Alleghany Corporation (NYSE:Y), with a stake worth $115.9 million reported as of the end of March. Trailing Polar Capital was Royce & Associates, which amassed a stake valued at $36.7 million. Echo Street Capital Management, Diamond Hill Capital, and Prospector Partners 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 0 allocated the biggest weight to Alleghany Corporation (NYSE:Y), around 3.86% of its 13F portfolio. 0 is also relatively very bullish on the stock, designating 2.96 percent of its 13F equity portfolio to Y.

Because Alleghany Corporation (NYSE:Y) has experienced bearish sentiment from hedge fund managers, it’s easy to see that there was a specific group of hedge funds that decided to sell off their full holdings heading into Q2. At the top of the heap, Daniel Lascano’s Lomas Capital Management dumped the biggest position of the “upper crust” of funds watched by Insider Monkey, worth about $53.3 million in stock. Jeffrey Bronchick’s fund, Cove Street Capital, also dumped its stock, about $7.6 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks similar to Alleghany Corporation (NYSE:Y). These stocks are SEI Investments Company (NASDAQ:SEIC), Amedisys Inc (NASDAQ:AMED), Gentex Corporation (NASDAQ:GNTX), West Fraser Timber Co. Ltd. (NYSE:WFG), Vornado Realty Trust (NYSE:VNO), Mirati Therapeutics, Inc. (NASDAQ:MRTX), and Carlisle Companies, Inc. (NYSE:CSL). All of these stocks’ market caps resemble Y’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.4 hedge funds with bullish positions and the average amount invested in these stocks was $717 million. That figure was $360 million in Y’s case. Mirati Therapeutics, Inc. (NASDAQ:MRTX) is the most popular stock in this table. On the other hand Carlisle Companies, Inc. (NYSE:CSL) is the least popular one with only 18 bullish hedge fund positions. Alleghany Corporation (NYSE:Y) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for Y is 55.5. 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 19.3% in 2021 through June 25th and beat the market again by 4.8 percentage points. Unfortunately Y wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on Y were disappointed as the stock returned 7.3% since the end of March (through 6/25) 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.

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